Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

GREATER LONDON COUNCIL (GENERAL POWERS) BILL

Read the Third time, and passed.

MILFORD DOCKS BILL [Lords]

As amended, considered; to be read the Third time.

EAST SUSSEX BILL [Lords]

As amended, considered.

Clause 1

CITATION AND COMMENCEMENT

Amendments made: Page 2, line 38, after "1" insert "(1)"

Page 2, line 38, leave out from "Act" to end of line 39 and insert—
1981.
(2) This Act shall come into operation on the expiration of three months after the passing of this Act.";—[Second Deputy Chairman of Ways and Means.]

Clause 2

INTERPRETATION

Amendments made: page 4, line 8, leave out "295" and insert "329";

Page 4, line 9, leave out "1959" and insert "1980";— [Second Deputy Chairman of Ways and Means.]

Clause 3

APPOINTED DAY

Amendment made: Page 4, line 19, leave out "1st January 1981" and insert
the commencement of this Act";—[Second Deputy Chairman of Ways and Means.]

Clause 26

TREES, ETC., IN HIGHWAY

Amendment made: Page 22, line 40, leave out
section 82 of the Act of 1959".
and insert
section 96 of the Act of 1980";—[Second Deputy Chairman of Ways and Means.]

Clause 33

GRASS VERGES, ETC.

Amendment made: page 31, line 3, leave out
section 70 of the Act of 1959
and insert
section 71 of the Act of 1980"—[Second Deputy Chairman of Ways and Means.]

Clause 51

INTERPRETATION OF PART X

Amendment made: Page 44, line 9, after "59" insert
(Exemption of premises from Part X) of this Act"—[Second Deputy Chairman of Ways and Means.]

To be read the Third time.

Oral Answers to Questions — INDUSTRY

Leicester (Electronic Engineering)

Mr. Greville Janner: asked the Secretary of State for Industry whether, in view of recent defence cuts, he will take steps to assist the electronic engineering industries in the city of Leicester.

The Minister for Industry and Information Technology (Mr. Kenneth Baker): The Government will consider any request from electronic engineering industries in Leicester for assistance towards particular projects within the rules of existing schemes for industrial support. The Department is considering the provision of products and process development scheme support to electronics companies in Leicester.

Mr. Janner: Is the Minister aware of the desperation experienced in the deeply troubled city of Leicester over the potential loss of jobs—due to defence cuts—in the two Marconi factories in my constituency? Will he consult the Secretary of State for Defence to see what can be done to help that company in its difficult position?

Mr. Baker: I regret that the difficult decisions that are made to meet essential defence requirements within the limits of prudent public expenditure have inevitable consequences for employment in particular places. I appreciate the hon and learned Gentleman's concern. The choice of radar in these contracts is for the Secretary of State for Defence to make. However, in this and all other public purchasing decisions full weight will be given to the long-term consequences for British industry as a whole. I undertake to bring the hon. and learned Gentleman's comments to the notice of the Secretary of State for Defence.

Mr. Latham: On that point, do the Government have an essential "Buy British" policy for Government-purchased public equipment? If so, would not the Marconi affair be a particularly good case in which to show that they have one?

Mr. Baker: The Government are developing a whole series of public purchasing initiatives. This subject has been discussed several times from the Dispatch Box. I prefer to describe the policy as a "Think British, buy British" policy. However, important considerations are involved in the placing of contracts.

Imported Steel Stocks

Mr. John H. Osborn: asked the Secretary of State for Industry what discussions he has had with the British Independent Steelmakers Association and British Steel Corporation about the volume and value of stainless, special, and tool steels imported and stocked in the United Kingdom, and the reasons why overseas competitors of the British steel industry are able to do this.

The Secretary of State for Industry (Sir Keith Joseph): The Department keeps in close touch with both the British Independent Steel Producers Association and the British Steel Corporation about all steel imports. The Department has not discussed imports of special steels

specifically with either BISPA or BSC recently, but I know that BISPA keeps in close touch with its opposite numbers on the Continent and with the European Commission about the level of imports.

Mr. Osborn: Does my right hon. Friend recall that he received first-hand information on this subject from the deputation that came to see him last week? Is he aware that the steel workers of Sheffield will not welcome the fact that there are no statistics—due to the Civil Service strike—to back up his case? Will he make representations to his colleagues in the Department when they next meet? Will my right hon. Friend bear in mind that Sheffield steel is concerned about unfair competition in relation to energy? Will he ensure that Ministers in the Department of Energy consider that when they next meet?

Sir Keith Joseph: I note and heed all that my hon. Friend has said. I shall keep in touch with BISPA about the changing situation.

Mr. Flannery: Will the Secretary of State accept that the plight of the special steels industry in Sheffield has nothing to do with any Civil Service strike? Will he accept that the import of special steels from the Continent and elsewhere is literally killing Sheffield's special steels industry? What will the Minister do to help the public and private sectors of the special steels industry—I make a plea for both of them—in perhaps the greatest area in the world for special steel production—Sheffield?

Sir Keith Joseph: A whole range of agreements seeks to modulate the amount of special steels imports into this country. As the hon. Gentleman knows, at the moment an inquiry initiated by the Bank of England and the industry is being carried out into the future of the industry. We await the publication of that report.

Dr. John Cunningham: Is the Secretary of State aware that the House will be somewhat surprised to learn that that important industrial issue has not, apparently, been discussed by his Department? I think that that is what he said. Is he aware that that is a major area of high value products on which not only Sheffield and Rotherham but major areas of British engineering are dependent? Were not the existing agreements within the EEC meant to act especially on exports? If the quota system is not working, what hope have we for the current discussions about future agreements within the EEC?

Sir Keith Joseph: The hon. Gentleman could not have heard the full answer that I gave, that we keep in close touch with BISPA and the British Steel Corporation about all aspects of the industry, including special steels. There have not been specific discussions with BISPA recently. As my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn) told the House, I have recently received a deputation from the industry.

Research and Development (Government Support)

Mr. Cadbury: asked the Secretary of State for Industry whether he is satisfied with the level of Government support for research and development in key industrial sectors.

The Under-Secretary of State for Industry (Mr. Michael Marshall): Yes. We are satisfied with the level of Government support for research and development in the main industrial sectors. The Government recognise the


importance of industrial research and development and they have increased the funds available. However, most of the money for civil industrial research and development comes from the profits of companies. The profitability of the industrial sector must therefore be improved to ensure adequate expenditure on research and development.

Mr. Cadbury: I thank my hon. Friend for his reply. Is he aware that over 50 per cent. of the Government's research and development expenditure is devoted to defence and that less than 10 per cent. goes on industrial research? Does he agree that in view of the urgency to raise productivity and to keep our technological lead—in those areas where we still have a technological lead—there is a strong case for correcting the apparent imbalance in our research spending?

Mr. Marshall: I note my hon. Friend's comments. If he brings together the various items under research and development, he will find that that goes rather wider than his 10 per cent. suggests. As an example, expenditure on space has wide-ranging implications for research and development and is a factor to be added to the figures that he has quoted.

Mr. Frank Allaun: Is the Minister aware that today the heads of Ferranti, GEC Marconi Electronics and others are meeting to oppose the cuts on Salford university? If the Government believe in more research and development, why are they cutting Salford, Aston and the other universities—Salford by 44 per cent—which means the loss of 700 engineering students and 500 others? Will they reconsider that?

Mr. Marshall: The hon. Gentleman will appreciate that much of what he is urging on us rests on decisions to be made by right hon. Friend the Secretary of State for Education. Taken overall, however, the number of science and engineering graduates for 1983 is expected to be at an all-time high.

Mr. Henderson: Does my hon. Friend accept that there is a special need to encourage the development of telecommunications-oriented products to ensure that British manufacturers can take the fullest part in the liberalisation of the telecommunications regime?

Mr. Marshall: My hon. Friend is correct. That is the purpose of the British Telecommunications Bill that I hope will be enacted shortly.

Mr. John Garrett: Does the Minister agree that there could hardly be a more important sector for Government research and development support than ICL? When will the Government make an announcement about their future level of support for research and development in ICL? Until that happens the company is not sure of its future?

Mr. Marshall: I recognise the importance of ICL. The Government are considering its circumstances. There is nothing I can say about that today.

Business Opportunities Programme

Mr. Colvin: asked the Secretary of State for Industry what progress has been made on the business opportunities programme.

The Under-Secretary of State for Industry (Mr. John MacGregor): The programme was launched on 5 May by my right hon. Friend the Prime Minister and my

right hon. and learned Friend the Chancellor of the Exchequer. Since then, publications on taxation, employment legislation and premises have been widely distributed, and Ministers have begun a programme of meetings throughout the country with local business men and their advisers. In the autumn and winter months there will be a series of major regional conferences, as well as many further smaller meetings.

Mr. Colvin: I am sure that the whole House will join me in applauding what my hon. Friend the Member for Norfolk, South (Mr. MacGregor), the Minister responsible, is doing to promote the business opportunities programme. Does he agree that with the passage of the Finance Bill, which will add the greatly improved business start-up scheme to the loan guarantee scheme that is already in operation, the Government will have created one of the most encouraging climates for investment in the smaller business sector ever in the United Kingdom? Therefore, will he ensure that during the recess other Ministers will join him in promoting the business opportunities programme so that the rest of the country will appreciate that that is the Conservative answer to the need for real job creation and a major element in the Government's plans for bringing work back to the rundown inner cities?

Mr. MacGregor: I am grateful to my hon. Friend for his remarks. He was correct in what he said about the schemes. In the business opportunities programme meetings that I have attended, I have found a warm welcome for the business start-up scheme and the changes, which have more than met all the criticisms made at the outset of the scheme. As always, it is important that such measures should reach down to the people expected to benefit from them. That is the purpose of the programme. I assure him that I shall be joined by colleagues in the autumn and winter months in ensuring that.

Mr. Park: Does the Minister agree that there can be many schemes, but if the cost of borrowing is outside the reach especially of smaller businesses, all the confidence in the world will not put the icing on that cake?

Mr. MacGregor: Obviously the Government are anxious that the cost of borrowing should come down as circumstances permit. That is the purpose of our policies, and that would not be helped by the policies being urged on us by the Labour Party. However, if the hon. Gentleman considers the loan guarantee scheme he will find that the existence of the scheme and the capacity to borrow matters more to many small, growing businesses than 1 per cent. or 2 per cent. on interest rates. Small businesses have shown that by their response to the scheme.

Productivity and Output

Mr. Gwilym Roberts: asked the Secretary of State for Industry what changes have taken place in the productivity and output of British industry since May 1979; what steps he is taking to increase productivity and output; and if he will make a statement.

Sir Keith Joseph: In the first quarter of 1981 manufacturing output was 20 per cent. lower than it was in the second quarter of 1979. Output per person employed was 8 per cent. below its level in the second quarter of 1979, but it rose by 1·9 per cent. between the last quarter


of 1980 and the first quarter of 1981. Output per head cannot fully reveal movements in productivity because it takes no account at all of changes in hours worked. By January of this year, for example, provisional estimates suggest that output per operative hour stood at a record level.

Mr. Roberts: Will the Secretary of State now admit that, in spite of the incredible optimism in the supplementary question asked by the hon. Member for Bristol, North-West (Mr. Colvin), the figures reveal clearly that the Government's industrial policies are not working and that the only effect of the so-called slimming down process—apart from the human hardship it creates—is to destroy our industrial base?

Sir Keith Joseph: No, I do not accept either proposition. Industrial countries as a whole have suffered a loss of industrial output during the last couple of years. We have suffered more than most because we were more over-manned and less competitive.

Mr. Chapman: Can my right hon. Friend give any data on the movement of labour unit costs, which are crucial to this question? As the British Steel Corporation has cost the British taxpayer over £6,000 million in the last 10 years, can he say whether output and productivity are improving in that industry?

Sir Keith Joseph: Yes, productivity is increasing, dramatically in some places, in the British Steel Corporation. We welcome that. In some cases, unit labour costs are falling, but that is after the huge increase in unit labour costs that followed the mad escalation of wage claims in 1980 which, as the House will remember, was unaccompanied by any rise in productivity or production.

Mr. Arthur Lewis: Whether one is Labour, Liberal or Tory, for or against private or public enterprise, should not one accept that if we are not producing the cake we cannot argue about how it should be shared? We are not producing the cake. When will the Government do something to get back to the production that we had in 1979?

Sir Keith Joseph: There is a limit to what the Government can do to secure the higher productivity and the better competitiveness upon which jobs depend. The House should recognise that that surge of high wage claims, unaccompanied by higher productivity, was to a large extent responsible for the dramatic rise in unemployment which immediately followed, as we warned.

Mr. Stokes: Does my right hon. Friend agree that there has been a substantial increase in productivity per man? Does he agree that that is most encouraging and augurs well for the competitiveness of British industry when the slump eventually is over?

Sir Keith Joseph: My hon. Friend is right that the gains in productivity, potential or actual, now being manifested will stand us in good stead as output recovers. However, we handicapped ourselves by those excessive wage claims without co-operation in productivity so that we have far further to catch up. Opposition Members totally mislead those whom they seek to lead by telling any different story. The future employment and prosperity of

the country depend upon good management and co-operation between work forces and management in securing profitable higher productivity and competitiveness.

Mr. Orme: Output and investment are down and unemployment is rising. Is the Secretary of State aware that the CBI's figures in its June forecast show that 70 per cent. of firms have a smaller order book? Is he aware of the IMF's international forecast of a depression? What steps are the Government taking to create employment and industry? The right hon. Gentleman is the Secretary of State for Industry. When will he do something about it?

Sir Keith Joseph: Nearly all our competitors are suffering a decline in manufacturing output because the growth in world trade has levelled off. We are suffering in particular for the reasons that I have already described—uncompetitiveness, low productivity and low profit. Those factors are closely and intimately linked with lack of co-operation, in many cases, between work forces and management to secure what is needed for more jobs.

West Cumbria

Mr. Campbell-Savours: asked the Secretary of State for Industry what representations he has received during the last month from leaders of West Cumbrian industry about industry in the area.

The Minister of State, Department of Industry (Mr. Norman Tebbit): None, Sir.

Mr. Campbell-Savours: Has the Minister received correspondence from the district councils and the county authority about the special development area status that we lost last year? In the light of the unprecedented level of unemployment, will he during the Recess either go himself or send one of his colleagues to West Cumbria to discuss with the local authorities the possible restoration of SDA status, specifically in the light of British Steel's recent redundancies?

Mr. Tebbit: I gave the hon. Gentleman the answer to the question that he tabled. He now puts another question to me because he did not like that answer. Indeed, I have received representations from the local authorities. I have pointed out in reply that in my view the present status of the area is correct, and that Government action or subsidies do not create jobs but that they are created by the action of work people and management on the spot. I hoped that the hon. Gentleman might have learnt his lesson from the fact that it was due to the co-operation of Leyland's work force in his constituency that the Titan bus line was transferred there as opposed to the places where the work forces were less co-operative.

Dr. John Cunningham: Will the Minister of State think again about the answer that he has just given? Under this Administration, West Cumbria has lost special development area status. It has suffered grievious closures in the steel industry, and in two small district authorities—Copeland and Allerdale—unemployment is unacceptably high, even by the Minister's standards. Is the Minister aware that such places have small resources, and representations would welcome the opportunity to discuss with him his ideas, which we might not accept, to try to find some way out of the unemployment morass?

Mr. Tebbit: I do not wish to be unsympathetic. My right hon. Friend Lord Trenchard has met representatives


and visited the area. It must be said that there are brighter signs in the local economy in that area. For example, British Nuclear Fuels Ltd., Thames Board Mills and Leyland National are expanding in the Workington area. There are ample advance factories in the area. It is up to local people to make the effort to be more attractive to would-be employers and investors.

Mr. Archie Hamilton: Does my hon. Friend accept that if the Opposition had their way virtually every town in the country would have special development area status?

Mr. Tebbit: Indeed, and the call for ever higher Government expenditure goes ill with the call made earlier by the hon. Member for Coventry, North-East (Mr. Park) for lower interest rates.

Nissan Car Company

Mr. Hal Miller: asked the Secretary of State for Industry if he will make a statement on the current stage of consideration of the Nissan project.

Mr. Michael Marshall: Nissan's feasibility study team has not yet completed its analysis of the project. However, since it was agreed earlier that there would be a further meeting in July, the leader of the team is now visiting the United Kingdom to give an interim report about the progress of the study. We do not expect the study to be completed until the autumn.

Mr. Miller: Does my hon. Friend agree that the acceptability of the Nissan project must depend on the extent to which there is genuine transfer of technology to enable our motor industry to become more competitive? Does he accept that the representations from the industry for a very high British content are designed to secure such a transfer of technology rather than the mere transfer of jobs in assembly and components from the West Midlands that would otherwise ensue?

Mr. Marshall: There is a great deal in what my hon. Friend says. The acid test will be, as he says, not only in the United Kingdom or European component element but in the transfer of technology. We do not yet know the final proposition. The opportunity presented, for example, in robotics, is of the highest importance in the project.

Mr. Barry Jones: Does the Minister understand that the desperate interest that we show in the project arises largely from the fact that some of our constituencies face horrendous rates of unemployment? May we assume that the project will be located in the United Kingdom rather than in Europe, either in Wales or on the North-East coast? When will constituencies such as mine be put out of their misery on the issue?

Mr. Marshall: It is clear that Nissan prefers either a special development or development area for the site of the plant. Representatives of the firm have visited a number of areas, including Wales.

Mr. Urwin: Can the Minister be more specific about the date on which information will be released about the decision? Between now and then, will he seek to ensure that at the forefront of the thinking of the people responsible for the Nissan project are the claims of the development areas and especially those of the North-East of England?

Mr. Marshall: I should like to be helpful to the right hon. Gentleman, but I am sure that he will appreciate that we expect to meet Nissan representatives in the next few days. It will be for them to decide on the timing of an announcement. I have forecast an announcement in the autumn. I cannot add to that. All the arguments are well understood by Nissan.

Bridlington

Mr. John Townend: asked the Secretary of State for Industry if, in view of the current level of unemployment, he will make a statement on development area status for the Bridlington travel-to-work area.

Mr. Tebbit: I have written to my hon. Friend explaining that, having regard to all the statutory criteria laid down in the Industry Act 1972, I am satisfied that Bridlington is appropriately graded as an intermediate area.

Mr. Townend: Is my hon. Friend aware that his reply will be greeted with disappointment in Bridlington, which is an intermediate area, because as recently as April there were no fewer than 50 special development and 51 development areas with lower unemployment rates than Bridlington? Despite the seasonal improvement, is the Minister aware that Bridlington still has a higher rate of unemployment than adjoining Hull, which is a development area? Does the Minister agree that the percentage of unemployed, rather than the numbers, shows the impact of unemployment on an area? Do not 100 unemployed in a community of 500 have as great an impact as 10,000 unemployed in a community of 50,000?

Mr. Tebbit: My hon. Friend slightly overstates his case, since in June the unemployment rate in Bridlington was 13·4 per cent. while in Hull it was 13·3 per cent. The numbers concerned were 1,387 in Bridlington and 24,311 in Hull. One has to take account of the absolute numbers of unemployed, as well as the percentages, before one can come to the right conclusion.

Mr. Allan Roberts: Will the Minister tell his hon. Friend the Member for Bridlington (Mr. Townend) that his constituents can greet the refusal to grant development area status for Bridlington with equanimity, because, even if that status were granted, unemployment would continue to increase dramatically unless the Government changed their economic and industrial policies? Is the hon. Gentleman aware that, if my experience in Merseyside is anything to go by, development area status for Bridlington would merely provide Ministers with the excuse of blaming the people of Bridlington for the Government's disasters?

Mr. Tebbit: I should prefer not to take the hon. Gentleman's experience as my guide for anything.

Small Businesses

Mr. Richard Page: asked the Secretary of State for Industry what is the present progress of the recently introduced initiatives to help small businesses.

Sir Keith Joseph: The loan guarantee scheme has received an enthusiastic response from small businesses. The Department has already issued 150 guarantees covering loans totalling £5·3 million. The business start-up


scheme has generated a great deal of interest from both small businesses and potential investors. The business opportunities programme is now well under way.

Mr. Page: I thank my right hon. Friend for that most encouraging news about the loan guarantees scheme. As there is an obvious need for such finance, will he give the House an assurance that he and his Department will take further steps to expand the facility?

Sir Keith Joseph: That would be going too far at this stage. We want to see how things go before we make any further decisions. There are resources available to let the first stage develop before we take further decisions.

Mr. Edwin Wainwright: When will the right hon. Gentleman admit that the Government's policies are nothing but a sheer failure? The Government may be making a contribution to helping small businesses, but what results have been forthcoming? Is he aware that we could do with some help in the Dearne Valley area, where unemployment in the Mexborough district is 20·6 per cent.? When will the Government do something to provide jobs and to create a greater understanding between themselves, the banks, management and work forces, to make sure that we get out of the rut that we are in?

Sir Keith Joseph: The hon. Gentleman is very fervent, but I wish that he would understand reality. People, many of them totally innocent, are suffering as the chickens come home to roost after years of Government overspending, patchy management and, in many cases, unco-operative work forces.

Mr. John Wells: Will my right hon. Friend take steps to extend the system, particularly to the dockyard areas that may suffer becuse of projected closures over the coming years?

Sir Keith Joseph: The system, as my hon. friend calls it, applies to the whole country and the dockyard areas are included in it.

Mr. John Garrett: Does the right hon. Gentleman agree that two years of small business Government policies have had no effect on the survival or formation of small businesses? The policies were meant to be purely cosmetic and are inisignificant compared with the industrial collapse caused by the Government's other policies.

Sir Keith Joseph: That is rubbish. There is strong evidence that, despite the climate of international recession and continuing high inflation, small business interest and foundation are increasing. We do not have precise statistics, but on the anecdotal evidence it is clear that all over the country small workshops are being snapped up by willing tenants in manufacturing as soon as they are provided.

Small Firms Counselling Service

Mr. David Hunt: asked the Secretary of State for Industry if he is satisfied with the small firms counselling service.

Mr. MacGregor: Yes. I have authorised an increase in the number of counsellors because of the substantially rising demand for their services. An independent evaluation has also confirmed recently that counselling is a highly cost-effective and practical way of providing a business managemet advisory service for small firms.

Mr. Hunt: May I thank my hon. Friend for that answer? In view of the success of the start-up scheme and the improvements to that scheme and the loan guarantee scheme, does he feel that the small firms counselling service should be extended to ensure that the necessary management skills are present for small businesses to take advantage of all the new initiatives?

Mr. MacGregor: I am grateful to my hon. Friend. He is right in saying that small firms counsellors, as well as small firms' managers, can assist in propagating the advantages of the various schemes to small businesses. However, as I have recently announced an expansion, and have extra facilities available this year to carry it out, we must wait to see whether that expansion of the service is sufficient.
My hon. Friend may wish to know that in his region the number of appointments made by counsellors in the first six months of this year was substantially up on the first six months of last year. That demonstrates some of the burgeoning small business activity that is taking place.

Mr. Ioan Evans: Are we getting a feedback, through the counselling service, from small firms? Many have gone into bankruptcy or closed and those who remain are having extreme difficulty with their order books and getting business. They put the problem down to the Government's industrial policies.

Mr. MacGregor: We have been getting a feedback through the counselling service. There are difficulties with order books because of the world recession and the general level of economic activity, but much of the feedback coming through is of enthusiasm in the small business sector. A large number of people are starting out on operations. That is where small firms counsellors can assist in guiding them.

Sir Bernard Braine: How does my hon. Friend define a small business, as opposed to a large or medium-size business? In considering ways of helping small businesses, has my hon. Friend any evidence that aspects of the Employment Protection Act 1975 are preventing small businesses from employing additional labour even when some face the prospect of expansion?

Mr. MacGregor: The question of definition is always difficult and different measures apply to different types of small firms. Broadly speaking, a small firm is one that employs fewer than 200 people. My hon. Friend may like to know that the small firms counsellors tend to counsel firms employing fewer than 25 people, but one aspect of the scheme which, through a pilot project, I am looking at this year is whether we can go further up the range beyond 25 employees. The evidence is that the Employment Protection Act is a good deal less of a bar to small firms that it was previously, because of the changes that the Government have made to the Act. The task is to let small firms know that those changes have taken place.

Micro-technology

Mr. Teddy Taylor: asked the Secretary of State for Industry what progress there has been in the application of micro-technology in British industry.

Mr. Kenneth Baker: About 30 per cent. of manufacturing companies are using, or are planning to use, micro-technology in their products and processes


according to a survey by the Policy Studies Institute, to be published shortly. This compares with 5 per cent. in the Department's survey in 1977. While encouraging, this is still not enough, and the Government have several initiatives to encourage United Kingdom companies to keep up with their international competitors in this very important technology.

Mr. Taylor: As the application of micro-technology, correctly applied, can make firms more competitive, do the Government feel that they have a role in promoting or encouraging the further use of micro-technology and would the Minister care to specify what that role might be in practice?

Mr. Baker: We certainly have a role. As I said, more than 50 per cent. of companies do not use micro-technology. Perhaps their most modern product is an electric typewriter. About £33 million has been committed to the microprocessor application project and a further £50 million to the microelectronic support programme. The funds are available to stimulate research and development and product and process development.

Mr. McNamara: What co-operation does the Minister's Department have with the Department of Employment in ensuring that in retraining programmes and work opportunity programmes initiated by the Department of Employment young people have an opportunity to train not in out-dated techniques and technologies, but in microprocessing, word processing and other technologies?

Mr. Baker: I have frequent discussions with my colleagues in the Department of Employment on this matter, and we have taken various initiatives. The Manpower Services Commission has an excellent range of courses in computer studies and services, and we have launched the "Micros in Schools" scheme which has been an outstanding success. We have had 1,000 applications since June.
On the general employment consideration, may I draw to the attention of the House today's announcement by the Hewlett Packard company of its intention to build a major plant in the Bristol area, using high technology to make computer memory discs? It is a major new investment in high technology and will provide more than 1,300 jobs by the mid-1980s. It is clear proof that the United Kingdom is an excellent base for companies in the high technology sector, and it will bring jobs to us.

Telecommunications Monopolies

Mr. Richard Shepherd: asked the Secretary of State for Industry, in proposing changes to the telecommunications monopolies, what assessment he made of the likely effect on standards of service received by the customer.

Mr. Kenneth Baker: My assessment is that the introduction of competition will lead to a significant improvement in standards of services.

Mr. Shepherd: What effect does the Minister expect that liberalisation of the monopoly will have and for instance, on telephone waiting lists, does he know what the waiting lists are?

Mr. Baker: One of the first fruits of the liberalisation programme is that BT's marketing edge has already been

considerably sharpened. I am glad to say that the waiting lists have come down significantly. If my hon. Friend is interested, I shall let him have the figures, but I can tell him that waiting lists have come down significantly in the two years during which we have been in office.

Mr. Gregor MacKenzie: Will the Minister of State comment on the statement made by the chairman of British Telecommunications that an early acceptance of the Beesley report would cost residential telephone sub-scribers an additional extra £300 million a year? How can that possibly assist telephone subscribers?

Mr. Baker: Exaggerated claims have been made about the effect of liberalisation on the revenues of BT. In the Beesley report, it was estimated that by 1983–84 the cost, in all, might be about £100 million. Even lower estimates have been made. At the recent conference organised by my Department on the subject of Beesley, BT was taken to task for making such exaggerated claims by the champion of the consumer, Dame Elizabeth Ackroyd.

Mr. Henderson: Does my hon. Friend accept that the full benefits of liberalisation of the telecommunications regime will come about only if British companies accept the opportunities that are presented to develop new products and services that will be of benefit to the customers?

Mr. Baker: I entirely agree with my hon. Friend. There is evidence that the three major British manufacturers already engage in substantial cost reduction exercises on their products and are introducing new products. That is what happens when people are given choice.

Mr. Les Huckfield: Cannot the hon. Gentleman accept that while the proposals, as we understand them, may purport to offer a wider range of services to communication facilities between big city centres, whether or not he accepts the precise figure provided by my right hon. Friend the Member for Rutherglen (Mr. MacKenzie), they will inevitably lead to an increase in telephone bills for the vast majority of consumers? Does he further accept that these proposals could potentially pose the biggest threat to those living in rural areas, because of his right hon. Friend's threat to close many sub-post offices?

Mr. Baker: These are complicated matters and it will therefore be simpler for me now to refute what the hon. Gentleman said. On another occasion I shall be happy to refute what he says in considerable detail. He should rest content for the moment with the fact that he is wrong.

Steel Industry (Capacity)

Mr. Hooley: asked the Secretary of State for Industry if he is satisfied that the current capacity of the steel industry, public and private, is sufficient to meet home and export demand over the next five years.

Mr. Michael Marshall: Yes, Sir.

Mr. Hooley: Is the Minister aware that steel is being imported which, given the capacity, the British Steel Corporation could easily make? Is he aware that the capacity in West Germany is 68 million tonnes, and that the capacity in Spain and Italy is greater than that of the


United Kingdom and is expanding? In such circumstances, what is the rationale of cutting back the United Kingdom's capacity to make steel?

Mr. Marshall: The rationale is that the United Kingdom production of between 16 million tonnes and 18 million tonnes of liquid steel is, in the judgment of those involved in the industry, more nearly related to the market situation. In Europe, as the hon. Gentleman is well aware, there is 30 per cent. to 40 per cent. excess capacity. It is now up to other countries to move in the same direction as this country has moved.

Mr. Hal Miller: Is my hon. Friend satisfied with the division of our present capacity between the public and the private sectors? If so, how will he maintain it, in the light of the considerable subsidies that are still being afforded to British Steel?

Mr. Marshall: No, I am not satisfied with the division. I look to the increasing opportunities of moving down the Phoenix route to bring more capacity to the mixed public/private Phoenix pattern.

Mr. Orme: Will the Minister say something about the negotiations in the EEC and the proposed quotas? From what we hear they will not be very advantageous to the British steel industry.

Mr. Marshall: This is a complex matter. We shall have an opportunity to debate it soon, when I am sure that the right hon. Gentleman will wish to pursue the matter. My hon. Friend, who has been deeply involved in these matters, will look forward to giving a full account of the situation. We have steered a course aimed at getting the best possible deal in difficult negotiations.

Industrial Improvement Grant

Mr. Eastham: asked the Secretary of State for Industry whether, in order to maintain manufacturing capability in industrial areas, he will introduce a system of industrial improvement grants for the refurbishing of buildings and equipment.

Mr. Tebbit: No. I am satisfied that sufficient incentive for such activity is already provided through the present tax system and in the existing Department schemes.

Mr. Eastham: Does the Minister realise that, while industries in some of the old towns and cities are suffering, many old and out-dated houses in those areas receive grants from other departments for their improvement? The same encouragement is not given to industry. We realise that section 7 of the Industry Act 1972 makes some allowances, but the provision is very vague. Is it not time that clear criteria were made available so that industries need not move out of established factories into special development areas, thus causing further trouble in cities?

Mr. Tebbit: The hon. Gentleman is wrong to say that the Industry Act 1972 is vague. It clearly specifies that repairs in the shipbuilding, marine, aerospace, locomotive and railway stock industries, and the repair of any plant or machinery designed for use in a manufacturing process can be a qualifying activity. In addition to that, regional development grants are available to assist in the refurbishment of factory premises. In general, the repair of factories should be undertaken by companies out of their profits—from their profitable trading activities.

Mr. Chapman: Will the Minister say what has been done to increase building allowances? For example, does my hon. Friend accept that an up-to-date modern factory or warehouse is just as important to a business for the purpose of increasing productivity as the modern up-to-date machinery that it clothes? Whatever level of industrial investment the nation can afford, will my hon. Friend look sympathetically at applications, because I believe that there are special cases in which it could be beneficial to the country in the long term?

Mr. Tebbit: I assure my hon. Friend that I always view these matters with as much sympathy as I can. On the other hand, in general, we have an adequate supply of factory space, and it would be better, in those cases where we are giving assistance, to assist with the purchase of up-to-date machinery to put into those factories.

Northern Region

Mr. Radice: asked the Secretary of State for Industry if he is satisfied with industrial progress in the Northern region.

Mr. MacGregor: No. The international recession has had its effect upon the Northern region, as elsewhere. That is why it is important that the Government continue with their policies to encourage enterprise and to reduce inflation, Government spending and interest rates, and for those in industry at all levels to increase our industrial competitiveness.

Mr. Radice: In view of the appalling increase in unemployment—over 90,000 in the Northern region since the general election—and in view of the collapse of many of our industries, and the riots that have taken place in our streets during the past fortnight, is it not time that the Government announced the abandonment of their faith in Adam Smith, and gave a great deal more help to the regions? Will the Government send a team of Ministers during the recess to the Northern region to see what is happening?

Mr. MacGregor: We must face the fact that, just as Britain's insidious but persistent decline has taken place over many years, so it is bound to take time to bring about a turnaround and deal with the chronic problems of uncompetitiveness, and so on. It should not, therefore, surprise the hon. Gentleman that there has not been a rapid improvement in progress. It will take time. His remedy of further increasing aid to the Northern region which, as he well knows, benefits more than any other region, can only be at the expense of higher Government spending, which inflicts harm on industry and on more profitable firms throughout the country. In answer to the hon. Member's question about sending a team of Ministers, although he may not regard me as a team, I shall be visiting the Northern region during the recess.

Mr. David Watkins: While I appreciate the Minister's little lecture, can I ask him to say when we shall see the much forecast upturn in the national economy, which is supposed to do so much for the Northern region in the absence of any coherent Government policy?

Mr. MacGregor: As my right hon. Friend has made clear today, and as is clear from international reports that are before the nation today, the problem is world-wide. There is a world-wide recession, and that is bound to have an impact on our own economic recovery.
I hope that the hon. Gentleman will not ignore the fact that, in so many parts of the country and in so many industries, as output recovers, the potential productivity improvements that have been gained over the past two years will be immensely beneficial.

Oral Answers to Questions — ATTORNEY-GENERAL

Shoplifting (Private Prosecutions)

Mr. Greville Janner: asked the Attorney-General how many representations he has received regarding private prosecutions for theft from shops in the metropolitan and Northumbria police districts.

The Solicitor-General (Sir Ian Percival): The Attorney-General has received no representations regarding private prosecutions for theft from shops in the Northumbria police district.
Since 12 January 1981, when I replied to a similar question tabled by my hon. Friend the Member for Christchurch and Lymington (Mr. Adley), one letter has been received referring to a private prosecution for theft from a shop in the Metropolitan Police district.

Mr. Janner: Is it not correct that the Metropolitan Police and the Northumbria police are the only police authorities that still refuse to prosecute for what they choose to call petty theft or shoplifting? Has not the time come when all prosecutions for these offences should be brought on behalf of the public by the police? Will the right hon. and learned Gentleman undertake to study the excellent arrangement already in force in Essex, where the police prosecute for these offences, where the person accused is old or ill or is a child, only after proper investigations have been made into the best way of dealing with the case?

The Solicitor-General: It is a fact that the Northumbria and Metropolitan Police districts are the two that leave it almost entirely to private prosecution.
It is perhaps interesting to remember, in that connection, my answer to the substantive question. There have been no complaints about Northumbria, and very few about the Met.
I shall, of course, look at the Essex case and, if the hon. and learned Gentleman cares to send me more details about it, I shall be happy to look at them. He will also have in mind what was said by the Royal Commission on criminal procedure in this report, which is currently being considered. Now is a suitable time for any representations to be made to the Minister responsible, namely, my right hon. Friend the Home Secretary.

Sir Bernard Braine: Will not my hon. and learned Friend agree, however, that distressing cases emerge from time to time where there should have been no prosecution? Would not it be appropriate to have some new machinery to deal with allegations of shoplifting when elderly people are involved who have no previous convictions?

The Solicitor-General: My hon. Friend probably has in mind exactly the case that I have in mind, and it has made quite an impression upon me. It concerned an elderly lady who was so shocked and ashamed that she did not tell anyone, even her daughter. Therein lies the trouble. If she had confided in someone sooner, help undoubtedly would have been available and would have been given. If that is the case that my hon. Friend is thinking about, I am happy

to think that once that elderly lady told people of the trouble that she was having, there were those very ready to help her.

Mr. Jeffrey Thomas: Does the Solicitor-General agree that that is one of very many distressing cases connected with so-called shoplifting charges? Will he arrange to meet the Home Secretary at the earliest moment to discuss the report of his advisory committee that has been looking; into cases of shoplifting for many months?

The Solicitor-General: I agree entirely with part of the hon. and learned Gentleman's question. There are some very distressing cases. Usually they involve people who have not given themselves the opportunity to receive help. There are some cases where, far from seeking help, accused people have tended to shut the door on those who would help them.
I am not so sure that I agree with the other part of the hon. and learned Gentleman's question in which he said that there are a lot of such cases. It does not lesser the importance of each case that arises, but, happily, there is no evidence that the number is very large.

Coroners (Dismissal)

Mr. Meacher: asked the Attorney-General when the Lord Chancellor last used his powers to dismiss a coroner.

The Attorney-General (Sir Michael Havers): In March 1944.

Mr. Meacher: Does not that show that the supervision of coroners is somewhat lax? Is not the right hon. and learned Gentleman aware that there is a great deal of dissatisfaction with the manner in which coroners conducted certain recent highly politically sensitive inquests, such as those into the killing of Blair Peach, the Iranian Embassy affair and, above all, the New Cross-Deptford fire? Is not it right that this small minority of highly politically charged cases, where coroners clearly are out of their depth, should be heard before a High Court judge and that all the relevant evidence, including the police investigators' report, should be made available to both sides and not, as at present, be confined to one side?

The Attorney-General: The fact that no coroner has been removed since 1944 does not indicate that the system is lax. It indicates that, by and large, coroners do their job very well.
As for the remainder of the hon. Gentleman's question, I have read with interest his two questions to the Home Office on 9 July, and I have nothing to add.

Mr. Lawrence: Does not my right hon. and learned Friend agree that public confidence in the coroner system is essential and that, although there is generally considerable public confidence in 90 per cent. of coroners' cases, there is a narrow area of recent cases that have shown some public disquiet? Is not it time that more attention was given to the legal qualifications of coroners and that an attempt was made to divorce some of the activities of the police from the organisation of coroners' courts, which exists in cases where police action is in dispute? Generally, is not it time for a closer look at the Brodrick recommendations that were made nearly 10 years ago, very few of which have been implemented?

The Attorney-General: As my hon. and learned Friend will know, the Broderick report involves


considerable manpower and financial problems. I read with interest the suggestions made by my hon. Friend the Member for North Fylde (Sir W. Clegg) on Second Reading of the Supreme Court Bill. Like everything else to do with coroners, this is a matter that is always kept under review.

Mr. Archer: May I press Mr. Attorney a little further? Does he accept that the major purpose of the coroner system is to ensure that matters of public concern are fully ventilated? Does he accept, further, that some cases these days perhaps arouse greater public attention and occasion greater public anxiety than in 1971 when the Broderick inquiry reported? Since some cases are bound to be conducted in a highly emotive atmosphere, does the right hon. and learned Gentleman accept that someone should have power to order that an inquiry in a specific case should be made before a High Court judge and that there should be a wider range of options about the possible findings?

The Attorney-General: With respect to the right hon. and learned Gentleman, the real function of the coroner's jury is not to deal with a matter of public interest. It is the more limited one of inquiring into the cause of death and not to attribute blame. But, as I said to my hon. and learned Friend the Member for Burton (Mr. Lawrence), any suggestion for improving the system of coroners' courts will always be considered. If there are genuine complaints about it, we must put them right.

Law Centres

Mr. Steen: asked the Attorney-General if the Lord Chancellor will review his guidelines for law centres.

The Attorney General: If my hon. Friend has any specific suggestions in mind, my noble Friend will be happy to consider them. In the meantime, however, the guidelines at present in force have received general acceptance with all the interested parties, and any change would have to be renegotiated.

Mr. Steen: Will my right hon. and learned Friend say whether the Lord Chancellor's guidelines approve the use of public money to finance the representation of trade unions by law centres? Is he aware that the Association of Clerical, Technical and Supervisory Staffs instructed the Central London community law centre to act on behalf of 45 staff of a London charity at interlocutory hearings and industrial tribunal hearings? Does he believe that it is a proper use of taxpayers' and ratepayers' money that unions should be represented in this way by law centres?

The Attorney-General: The matter has been, and remains, under consideration by the Lord Chancellor. The inquiries of which I know do not support the view that this was an application by a trade union taken up by the law centre but rather an application by a number of individual members of a trade union.

Mr. Archer: Will the Attorney-General tell the House when we may expect the report of the inter-departmental working party on law centres, appointed following the Benson recommendations?

The Attorney-General: I think not for some time, but if I can obtain any further information I shall write to the right hon. and learned Gentleman.

Tenerife Air Disaster

The Secretary of State for Trade (Mr. John Biffen): I wish to make a statement on the accident to Dan-Air Boeing 727 G-BDAN at Tenerife on 25 April.
An agreed English translation of the report of the Spanish commission of investigation into the tragic accident to a Dan-Air Boeing 727 at Tenerife on 25 April 1980 is to be published today in Spain and in the United Kingdom.
The House will recall that the accident has already been the subject of two separate statements made by my predecessor last year on 28 April and 10 June. Even so, I think it appropriate to make a further statement in the light of the published report.
The accident, the worst in the history of British aviation, has been the subject of an exhaustive investigation in which my Department's accidents investigation branch and the American National Transportation Safety Board actively participated. There was a full and free exchange of information between the United Kingdom investigators and the Spanish commission of inquiry.
Briefly, the accident followed an ambiguous radio transmission to the aircraft from Tenerife air traffic control. That resulted in the commander becoming disorientated and caused him to turn the aircraft towards an area of high ground.
The Spanish report places responsibility for the accident firmly on the aircraft commander. Although it is true that final responsibility for maintaining a safe altitude must always rest with the commander, the report seriously understates those inadequacies of the Spanish air traffic control organisation which contributed to the accident. I have, therefore, decided that an addendum should be published to the report which sets out the following additional points that need to be made in order to achieve a balanced assessment of what happened.
First, the information transmitted by Spanish air traffic control about the holding pattern at a particular radio beacon was ambiguous and contributed directly to the disorientation of the crew. The transmission by the commander that the aircraft was taking up a holding position at that radio beacon was acknowledged by air traffic control, and not queried. That amounted to a tacit approval of the action proposed by the commander and implied that it was what air traffic control required.
Secondly, on the basis of the standards set out by the International Civil Aviation Organisation, the United Kingdom investigators consider that the minimum safe altitudes for entry into, and holding in, the pattern at the beacon in question are 2,000 ft and 1,000 ft higher respectively than the figures produced by the Spanish authorities. It became apparent during the investigation that no minimum safe altitudes had been calculated prior to the accident. As no holding pattern at that beacon had been published, the crew understandably accepted air traffic control clearance to descend on the assumption that those calculations had been made. If that clearance had not been given, the aircraft could have been expected to have maintained height and the accident would not have occurred.
Finally, the safe theoretical aircraft track for the area portrayed in the Spanish report is not practicable. An

aircraft would not be able to fly around the sharp angles drawn. A more realistic track would take the aircraft towards the area of high ground to the south west of the airfield. That factor must be taken into account when calculating minimum safe altitudes.
I am sorry that it has not been possible to reach full agreement with the Spanish authorities on the importance of those three points, and that the addendum has therefore been felt necessary. The Spanish authorities have agreed to attach the addendum to their report.
I am sure that both sides of the House will once again wish to join me in expressing Parliament's distress at this tragic accident, and our greatest sympathy to the relations and friends of all those who were killed.

Mr. Clinton Davis: Is the Secretary of State aware that the Opposition join him in expressing condolences to all those bereaved as a result of this appalling tragedy? Is he aware also that we believe that he and the accidents investigation branch are to be applauded for insisting on publication of the addendum, for the sake of fairness and accuracy, and to rectify grave inconsistencies between the findings and conclusions in the report, there being no suggestion in the conclusions of any culpabilty on the part of the air traffic controllers, despite strong evidence to that effect in the findings?
Is the right hon. Gentleman aware that it is appropriate to raise a series of further grossly disturbing features that have accompanied the report, to prevent their recurrence? First, there was the undesirability of the leakage by the Spanish authorities of portions of the report. Secondly, there were the baseless allegations by them of political interference by the British Government, and, by implication, the accidents investigation branch, in the investigations. Will he convey to the Spanish Government the view, which I am sure is held by all sections of the House, that such actions impair the impartiality that is an essential prerequisite if there is to be effective co-operation in accident investigation work, not only with our branch, but with organisations throughout the world?
Will the right hon. Gentleman say what specific lessons are to be learnt from the tragedy, and whether he believes that any recommendations should be made for action by the ICAO.? Does he agree that the report reinforces the view that a clear burden lies on air traffic control to be explicit and unambiguous, especially where a familiar routine is disrupted or an unusual holding pattern is issued at short notice?
Will the right hon. Gentleman comment on the desirability of having radar installed, which at least diminishes the scope for error by air traffic controllers? It might have averted the catastrophe had the controllers had a better picture of the position.
Has the right hon. Gentleman received any message from the Spanish authorities about whether any remedial action is being taken at a time when hundreds of British passengers are going to Spain on their holidays, so that there is no possibility of that situation occurring again?

Mr. Biffen: I thank the hon. Gentleman for many of his remarks, especially his kind reference to the accidents investigation branch and the importance of publishing the addendum so that we may have a fully balanced view of the evidence.
The question of using radar was raised on both previous occasions when a statement was made from the Dispatch Box about the crash. I am advised that the absence of radar is not thought to be a material factor to the tragedy.
On the question of the safety of Spanish airports and holiday traffic, a study of the report and the addendum will show that the problems were essentially those of human error, rather than of any alleged mechanical defect. That should be placed on record, in view of the possible anxieties of those who are travelling to the Mediterranean.
The hon. Gentleman asked whether I intend to have discussions about the premature disclosure of the report and other closely related matters. It is my intention to approach General Iniquez, the Director General of Air Transport, to ascertain whether he can help in explaining how there was early release of the Spanish report and of the cockpit voice recorder tapes, which featured subsequently. These matters fall within Spanish sovereignty, and we must proceed with the proper proprieties. I have deferred making an approach until after my statement, because I believe that it will be helpful if I can indicate that the sentiments that I express are widely shared in the House. The same goes for the more general discussion about what action can be taken to profit from this miserably unhappy affair.
I propose to discuss with the Civil Aviation Authority an approach to the International Civil Aviation Organisation with a view to discussing with the Spanish authorities what improvements in aircraft procedures might be undertaken in the light of the Tenerife report and its addendum.

Mr. Cranley Onslow: It is crystal clear that the first and fundamental cause of the accident was inadequate air traffic control procedures on the Spanish side. As the Spanish inquiry fails to bring that out, how can anyone rely on a nation that is not interested in a full and impartial inquiry to bring out all the relevant facts taking the necessary action to prevent this sort of thing happening again?

Mr. Biffen: I am not sure that the addendum will bear out what my hon. Friend has said. It will bear out human frailties rather than mechanical failure.

Mr. Charles R. Morris: Is the Secretary of State aware of the sense of outrage felt by the dependants of those who lost their lives in this tragedy over the report brought back by two distinguished visitors who visited the site on 12 March of this year, about 12 months after the crash took place, that clothing, handbags, suitcases, shoes and debris were still strewn about the site? That appalling insensitivity must be brought to the attention of the Spanish authorities.

Mr. Biffen: I take note of what the right hon. Gentleman says. He speaks not only with feeling, but with a record of deep involvement in the tragedy since it occurred. I think that he will accept that the factors that he has described do not fall within the ambit of the investigation.

Mr. Kenneth Warren: Will my right hon. Friend accept that the human frailties to which he referred have involved the deaths of many hundreds at Tenerife airport? The ambiguities of instructions issued by the air

traffic control authorities have resulted in the world's worst air accidents occurring at that airport. Does he agree that it would be wise to contact the Spanish Government immediately and ask them to ensure that the air traffic controllers issue only set instructions, and do not use their imagination, which is what is costing lives? Finally, I suggest that my right hon. Friend should consult the International Federation of Airline Pilots Associations, which has compiled a record of bad practices in the maintenance of the limited landing aids that are available at Tenerife airport.

Mr. Biffen: I note what my hon. Friend says. It is important to keep in mind that some of the other tragic air accidents that have occurred at Tenerife airport have not necessarily been the occasions of failings on the part of the air traffic control. I do not think that we necessarily improve our case by overstating it. I shall ensure that the other matters to which my hon. Friend referred are brought to the attention of the Spanish authorities when I make my approach to them.

Mr. Alfred Morris: It is made pikestaff plain in the United Kingdom accredited representative's addendum that, without his quite severely critical comments, the Spanish report is neither balanced nor acceptable. Ought not the addendum to be used to secure urgent reconsideration of the recommendations on page 29 of the report? Is not this a striking example of the case for a standing international commission to investigate all air disasters? What is the right hon. Gentleman doing to advise families that may be considering legal proceedings in Spain? Is it not time that the Government gave official advice about the comparative safety at least of European airports to those who travel to and from them?

Mr. Biffen: The right hon. Gentleman will know that air safety is primarily the function of the CAA. I believe that the system that it operates involves an assessment of each airport according to its particular characteristics. It does not involve the league table approach that is sometimes advocated. None the less, it is a system that commands wide public support in the United Kingdom. It is a long-established practice that the published evidence and conclusions resulting from investigations into accidents are held not to be available for legal preceedings.

Several hon. Members: rose—

Mr. Speaker: Order. I propose to call those who have been rising in their places to question the Secretary of State.

Mr. Michael Colvin: Is my right hon. Friend aware that it has been suggested that 15 months is an inordinately long time for the inquiry? Does he agree that by world standards that is about average? Secondly, does he agree also that in the premature statements and disclosures it was regrettable that the Spanish authorities saw fit to blame pilot error for the cause of the accident, before any investigation had taken place, and that, by world standards, this is something that should not be allowed to happen?

Mr. Biffen: If the Spanish authorities attributed the accident to pilot error before ever an investigation had been undertaken, that was profoundly regrettable. I have no reason to believe that the authorities made such an allegation, although I can well understand that there was


press speculation in Spain to that effect. Although the time taken for the investigation may seem to many to have been inordinate, it is by no means unusual.

Mrs. Gwyneth Dunwoody: Is the hon. Gentleman aware that the families of the crew were deeply affronted by the suggestion that the crew were responsible for the accident, and that those families will welcome the addendum? As this is the second major accident at Tenerife airport in which failure to communicate has been a strong contributory cause, is the right hon. Gentleman satisfied that the Spanish authorities are doing enough to ensure that their air traffic controllers use only acceptable international phrases and adhere to the proper procedures?

Mr. Biffen: I am grateful to the hon. Lady for her comment about the role of the addendum in enabling the relatives of the pilot and crew to feel that there has been some equity and justice in the inquiry. I realise that without it there would have been a strong sense of injustice. I have to recognise that the matters raised in the second part of the hon. Lady's question are essentially within the authority of the CAA. That is why I am suggesting that, in the light of the report, it might approach the International Civil Aviation Organisation with the object of reviewing the procedures that have been operating at Tenerife. At the end of the day, however, we must recognise that these are matters essentially within Spanish sovereignty.

Mr. Kenneth Lewis: Does my right hon. Friend agree that in all grave accidents of this kind—which, fortunately, do not happen very often—there ought to be a more independent form of inquiry? Does he agree also that one of the reasons why this matter has taken so long is that the Spanish authorities were involved in it themselves? Should there not be international discussions on this issue?

Mr. Biffen: I shall consider my hon. Friend's suggestion, but I should have thought that, almost to a man and woman in the House, there would be a belief that our accidents investigation branch is without equal. If one deserts the existing standards, one has to be certain that the replacement will be every bit as acceptable.

Mr. Fred Silvester: I thank my right hon. Friend for publishing the addendum. In an emotional atmosphere, it is a very valuable addendum to have. It confirms the generally held view about evasion on the part of the Spanish authorities. Will my right hon. Friend therefore use this small opportunity in the House to underline to the Spanish authorities, when he sees or speaks to them, the sense of outrage that has arisen as a result of their performance in this case? Will he outline to them that the attitude of British travellers to Spain will depend very much on the behaviour of the Spanish authorities in the future?

Mr. Biffen: I have no doubt that British travellers and British tourist organisations will make their own judgments, and, in a sense, their own representations to the Spanish authorities about what accidents of this kind do for tourist business between the two countries. I must proceed on the assumption that there is good faith in these matters, even though there is a difference of interpretation in commonly accepted data. I hope that my hon. Friend will allow me to proceed in that fashion and therefore tailor my language accordingly, in the hope that it will be none the less effective.

Mr. Hal Miller: Will my right hon. Friend accept from me, on behalf of the relatives of the dead commander of the aircraft, their thanks for his probity and courage in publishing the addendum to the inquiry? It will go some way towards relieving the deep pain, even if it cannot relieve it entirely. There has been great anxiety, and they have been put to some expense in trying to commission their own independent inquiry, in view of the widespread suspicions about the lack of progress and the direction that the original inquiry was seen to take.

Mr. Biffen: I thank my hon. Friend for putting the matter in such generous and personal terms, but I suggest that the House of Commons would not have been prepared to accept anything less than the report plus the addendum.

Middle East

Mr. Tony Marlow: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the crisis in the Middle East".
At 11 o'clock on Friday 17 July seven aircraft of the Israeli Air Force unleashed a savage bombardment on the Beirut suburb of Fakehani. It is estimated that 300 people were killed and 800 injured. The raid was concentrated on an area containing the offices of the PLO, the umbrella organisation through which 4¼ million disinherited, displaced and, in many cases, impoverished Palestinians seek legitimately, and in a variety of ways, to advance their nationhood.
The majority of the casualties, however, were civilians, Lebanese and Palestinian, young and old, women and children. Fakehani is an area containing jerry-built, multi-storey tenements, teeming with population, many themselves refugees from the violence in Southern Lebanon, and saturated with shops, hand-barrows, and the necessary paraphernalia of busy city life. It is easy to imagine the mayhem that such an attack would have caused.
The raid was ordered by Menachem Begin, the same man who ordered the slaughter of British soldiers and British civilians at the King David hotel. Old terrorists never die; they merely become more arrogant and inhuman.
The pretext for this onslaught was the attack by Palestinian Katyusha rockets on Kiryat Shimonah, in which three Israelis died—300 against three. This attack itself was a meagre gesture of defiance against massive Israeli raids which preceded it. It seems that Mr. Begin—

Mr. Speaker: Order. The hon. Gentleman must direct the attention of the House to why he thinks that there should be an emergency debate of the House. He is not free merely to make an ex parte speech, which might call for a reply.

Mr. Marlow: I was just setting out the specificity of the matter. The urgency follows from the fact that the Lebanon is not merely a far-away place, purely of moral concern to Britain. It is the siren that lures the United States on to the rocks of injustice and alienation from

moderate opinion in the Middle East. It is the cauldron that could start a chain reaction to world war. It is a daily slur and insult to Arab pride and dignity, which in turn could produce as yet undreamt of dislocation to the world economy.
I believe that hon. Members in all parts of the House support the European initiative—[HON. MEMBERS: "No."]—to bring peace to the Middle East. I believe that the peace and prosperity of this country is to a large extent dependent on this initiative succeeding. It is fundamental that we should have a debate on the issue, which has created massive shock waves in the Middle East and is a massive threat to peace in the world. It is a second Guernica. It is an atrocity to rank with Lidice and Oradour-sur-Glane. It should be seen as such. It is incumbent upon the House to debate the matter without delay.

Mr. Speaker: The hon. Member for Northampton, North (Mr. Marlow) gave me notice before 12 o'clock midday that he would seek leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
the crisis in the Middle East.
The House has listened with anxiety to the remarks of the hon. Gentleman about a dangerous and difficult situation. As the House knows, under Standing Order No. 9 I am directed to take into account the several factors set out in the order but to give no reasons for my decision.
I have given careful consideration to the representations that the hon. Member has made, but I must rule that his submission does not fall within the provisions of the Standing Order, and therefore I cannot submit his application to the House.

BILLS PRESENTED

SEX SHOPS (CONTROL)

Mr. John Wells presented a Bill to enable local authorities to register and control sex shops: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 193.]

EDUCATION IN PRISONS

Mr. Harry Greenway presented a Bill to require the provision of educational facilities in prisons and other custodial institutions, and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday and to be printed. [Bill 189.]

European Community Budget

[Relevant Commission documents:
Preliminary draft supplementary budget No. 2, 1980
(Document No.
12085/80). Draft supplementary budget No. 2, 1980
(unnumbered).
Modifications and amendments by the European
Parliament to the draft supplementary budget No. 2
1980 (Documents Nos. 12547/80 and 12489/80).
Decisions taken by the Council on the European
Parliament's amendments and modification to draft
general budget, 1981 (unnumbered
explanatory memorandum of 11th December 1980).]

The Financial Secretary to the Treasury (Mr. Nigel Lawson): I beg to move,
That this House takes note of the Preliminary Draft Amending Budget No. 1 to the General Budget of the European Communities for 1981 and the Preliminary Draft General Budget of the European Communities for 1982.

Mr. Speaker: I have selected the amendment in the name of the Leader of the official Opposition.

Mr. Lawson: On Thursday of this week, 23 July, in Brussels, the Council of Ministers will be meeting for the first time to consider the European Commission's preliminary draft amending budget No. 1 to the general budget of the European Communities for 1981, and the preliminary draft general budget for 1982.
The purpose of the debate is to give the House an opportunity to comment on the Commission's proposals before they are discussed at the Budget Council on Thursday, at which I will preside and my hon. and learned Friend the Minister of State will represent the United Kingdom. The House may be assured that he will take fully into account the comments made during the course of this debate.
Unlike other manifestations of the Council of Ministers, the Budget Council is unique in having to maintain the closest possible mutual understanding with the European Parliament, which has the power to amend within limits and, indeed, to reject the Council's budgetary proposals.
The Budget Council will accordingly be meeting representatives of the European Parliament on Wednesday, the day before the Council meeting, for an initial discussion of these matters, which will, I hope, get things off to a constructive and reasonably harmonious start. My hon. and learned Friend, who is an expert in these matters, will know that this initiative of meeting the representatives of the Parliament the day before the Budget Council is entirely new and I hope that it will prove helpful. Of course, all this is merely the beginning of a lengthy procedure which will, I trust, lead to the establishment of a satisfactory budget for 1982 by Christmas, or even a few days before.
As the motion indicates, various other documents are relevant to the debate, but I hope that it will be for the convenience of the House if I concentrate on the Commission's proposals for an amending budget for 1981 and for the main budget in 1982, and then perhaps to say a word on the report that was recently published by the Commission on the crucially important matter of

restructuring the Community budget. Finally, I propose to deal briefly with the amendment in the name of the Leader of the Opposition.
The main purpose of the 1981 amending budget is to provide a political solution to the continuing dispute over the legality of the 1981 budget, pending the resolution of which three member States—Belgium, France and Germany—have been withholding a part of their budgetary contributions.
The main feature of the proposed amending budget is a reduction of over £300 million in provision for the CAP, largely as a result of the higher than expected level of world food prices, offset by a slightly smaller increase in spending on other items, in particular the regional fund. I have no doubt that the Council will seek to modify these proposals, looking in particular for a rather larger net reduction in expenditure than the Commission has proposed. I very much hope that on this sensible basis it will be possible, with the agreement of the European Parliament, to bring to an early end the outstanding dispute over the 1981 budget, whose legality would then be accepted by all member States. It is clearly in the interest of the United Kingdom and the Community alike that that should be so.
I come now to the 1982 budget. The full details of the Commission's proposals are set out in the documents that are available to the House and are summarised at length in the Treasury's explanatory memorandum of 26 June. The net effect would be an increase in payments over 1981—after taking into account the proposed amending budget for that year—of about £1½ million, or about 16 per cent. Within that figure, expenditure on the CAP is assumed to rise on the same basis by 8·3 per cent., and expenditure on the non-agricultural parts of the budget—of which the regional and social funds are, of course, the most important—by about 37·6 per cent. I want to make it absolutely clear that these are proposals made by the Commission. When the Council considers them, I have no doubt that it will inevitably have in the forefront of its mind the domestic budgetary preoccupations of the various member States of the Community. Most of them are engaged at present in a protracted and painful process of belt-tightening at home, and would expect there to be a widespread awareness of the fact that one cannot justify austerity at home and expansiveness abroad.
That is not the only constraint on Community expenditure. Happily, the Community budget is obliged to be in balance and, thus, expenditure is rigidly tied to revenue. Both the Council and the Parliament will be keenly conscious of the inexorable approach towards the ceiling on the Community's resources imposed by the 1 per cent. limit on the VAT contributions to Community revenues. The 1982 draft budget comes closer than ever to this limit, with an implied VAT rate of 0·95 per cent. Some may consider that to be a trifle too close for comfort, but in any event it is already clear that the discipline of the 1 per cent. ceiling is having a salutary effect.

Mr. Tony Marlow: What would happen to the 0–95 per cent. of VAT if there were a massive lowering of world food prices? Would it become higher? Would there be a problem? How would the Community budget then cope?

Mr. Lawson: My hon. Friend may benefit from listening to all my remarks. I was about to say that there


can be no increase in the 1 per cent. VAT limit except on a unanimous basis. All member States must agree. As I was about to say, Her Majesty's Government have made clear their determination to keep the ceiling in place, as have the German Government.

Mrs Elaine Kellett-Bowman: Will my right hon. Friend also seek to keep in perspective the proportions that the Commission has suggested? Would he not be in favour of retaining the proportion of plus 8·3 per cent. to agriculture and plus 36·7 per cent. to regional and social spending, because the regional and social funds are immensely advantageous to this country?

Mr. Lawson: My hon. Friend is a Member of the European Parliament and a great expert on these matters. I assure her that I shall be dealing with the question of the balance between the various parts of the Budget; indeed, I am asked to do so by the Opposition amendment.
As I was saying, the own resources ceiling imposed on the Community's budget is the sort of financial discipline that is imposed at home by the limits to which member Governments can tax their people or borrow. To raise the ceiling as soon as it was reached would not be consistent with the present need for economy and restraint. The Community budget can no more do without financial discipline than can our domestic budget. Any increase in Community public expenditure has precisely the same economic consequences as does any increase in national public expenditure. What is just as important is that one major incentive to improve the working of the CAP would be removed if the ceiling were increased, since the way would then be open for a further uncontrolled increase in agricultural expenditure by the Community.
There are no automatic stabilisers under the CAP—nothing to shield the net contributor countries in particular from the consequences of any collective extravagance. On the contrary, the more that expenditure rises on that, the greater the budgetary imbalances become, with the position of the net contributor countries correspondingly worsened.
Therefore, within the resources available, it is my hope that member Governments will accept the need to restrain the provision for CAP expenditure. Otherwise, there can be no hope of, and no scope for, developing new areas of expenditure—for example, on industry and employment measures. We have to shift the balance of the budget since there is no possibility of finding large amounts of new money to spend in those other areas, however worthy they may be.
Within the overall proposals contained in the 1982 draft budget, provision for the European agricultural guidance and guarantee fund, as it is called, accounts for over 60 per cent. of total expenditure, as the Opposition's amendment points out. That is certainly less than in previous years, but still the lion's share.
Since the Community is so close to the limit of its revenue, it is all the more important that we should ensure that estimates in all areas, not excluding the CAP, are tightly drawn. During the Budget Council discussions we shall, therefore, be looking very carefully at the Commission's estimates included in the 1982 preliminary draft budget to see whether savings can be made in those proposals.
Within the possibilities for increased expenditure, as compared with last year, the United Kingdom intends to urge that priority be given to the regional and social funds. We have been a significant net recipient from those funds in the past, and that has enabled us to finance a higher level of expenditure in the United Kingdom in those areas that would otherwise have been the case. In any event, those are the most important areas of so-called non-obligatory expenditure since they are directly concerned with improving employment prospects and alleviating regional imbalances.
I now turn to the United Kingdom's net contribution to the Community budget and to the whole question of restructuring the budget, of which this is a vital part. As the Treasury's explanatory memorandum makes clear, the preliminary draft budget for 1982 included £867 million by way of provision for refunds to this country to implement the end-May 1980 agreement relating to this country's net contributions to the Community budget.
The Conservative Administration can take considerable satisfaction from the fact that the Budget now includes specific provision for refunds to this country. Successive British Governments have argued continually about our budget contribution, but this is the first time that we have seen money in the bank. We owe that achievement to a great deal of persistent negotiation, notably by my right hon. Friend the Prime Minister, leading up to the agreement concluded on 30 May last year. We have so far received about £645 million and expect more later this year.
I concede that this is only the beginning of the road. The next step must be to build on the 30 May agreement to achieve an improved and lasting solution to the budget problem. The agreement guarantees us a second year of refunds, which will come mostly in 1982. Thereafter, it commits the Community to a radical reform of the budget—to "restructure" it, in the jargon. If this cannot be achieved in time to affect the 1982 budget, the United Kingdom special refund will be extended.

Mr. Denzil Davies: The Minister has explained that some money will be coming as a result of the 30 May 1980 agreement, which relates only to the 1981 budget. Will he tell the House, as his explanatory memorandum does not, what will be Britain's net contribution in respect of—I choose my words carefully—the 1982 budget? He tells us that the gross contribution will be £2,700 million.

Mr. Lawson: The net contribution this calendar year will be a little more than £500 million. With regard to next year, with the leave of the House, I hope to be able to reply to the debate and I shall certainly give the hon. and learned Gentleman the best estimate, but it will be roughly of the same order.
The Community is now committed to a radical reform of the budget. My right hon. and learned Friend the Chancellor referred to this in his speech at The Hague on 3 June, when he set out the Government's general approach to the whole issue. He argued that the Community must in future take conscious decisions on the overall effect of the budget on individual member States and that those decisions should be based upon objective criteria, such as relative prosperity and population size.
Since then, as hon. Members will be aware, the Commission has produced its initial proposals in


pursuance of the mandate entrusted to it. Its report clearly recognises the need both to improve the operation of the CAP and to correct the United Kingdom's inequitable budgetary situation. It makes some interesting suggestions as to how to achieve those aims. In particular, it suggests that some continuing correction should be made for the United Kingdom's low receipts from the CAP.
I am sure that hon. Members on both sides will understand that it is far too early to say what the precise effect on the United Kingdom would be. There are no figures in the Commission's report. The effect of its proposals would clearly depend upon all kinds of details which have yet to be discussed within the Community. None the less, it is helpful to have proposals on the table and we look forward to examining them sympathetically with our partners.

Mr. Marlow: My question is purely for clarification. The Minister said that in 1981 the net budget contribution would be about £500 million. We pay some money this year and we get some back next year. Is he saying that at the end of the calculation it will be £500 million, or that the cash flow effect of our membership of the Community in terms of budget contribution this year will be £500 million? If it is more than that, will he tell the House?

Mr. Lawson: With the exception of a small amount in advances, we get the flows in arrears. That is to say, the refunds in respect of 1980 are received in 1981 and those in respect of 1981 will be received in 1982. Indeed, the mechanism is such that our precise entitlement can be calculated fully only at the end of the year in question. It is therefore inevitable that the refunds should be paid afterwards. There is no lengthening lag, as it were. It is simply that, with the exception of the advances, payment is in arrears.

Mr. Donald Anderson: Will the Minister give an assurance that any formula accepted by the Government will be no less favourable than the current formula negotiated in May last year?

Mr. Lawson: We shall certainly negotiate hard for the most favourable formula that we can secure. These are negotiations, however, and I am sure that the House will not wish—as on some occasions, although certainly not all the time, as was apparent in the earlier negotiations—to put the Government at any disadvantage in the conduct of the negotiations.
The Commission's approach, of course, is not the only possible one. It could have cast its net a little wider in its search for solutions. It could have followed the lines suggested by my right hon. and learned Friend the Chancellor in his speech at The Hague. The problem of budgetary imbalances is not merely a British problem. The 30 May agreement makes it clear that the aim is to avoid an unacceptable situation for any member State. It is also clear that the Community needs a durable solution. The Commission's proposals are rather more limited. The scheme that it suggests would be temporary and confined to the United Kingdom.
One of the main questions that we and other member States will have to ask is whether the Commission's proposals might be adapted to provide a broader and permanent Community solution. The European Council has agreed that the issues must be examined intensively in the second half of this year. We, as the Presidency during

that period, shall do our best to make progress. Needless to say, it will not be easy. Nevertheless, we may take heart from the fact that very considerable progress has been made in the past two years. The nature of the problem is now well understood, as it was certainly not when we took office, and it was officially recognised when the 30 May 1980 agreement was concluded. We must now build on that.
I turn finally to the Opposition amendment. I must say that this is one of the most brazen pieces of impudence to have sullied the Order Paper. They complain that the budgets before us today
make no basic reform in the EEC Budget arrangements or in the Common Agricultural Policy".
Even the Opposition must surely be aware, as I have already pointed out, that this is precisely what the restructuring exercise is about. That is made absolutely clear in the Commission's recent report. It also makes clear that this will now be carried forwards by the Foreign Affairs Council, under the chairmanship of my right hon. and noble Friend the Foreign Secretary and by the European Council under the chairmanship of my right hon. Friend the Prime Minister. I shall seek to ensure that the 1982 budget is consistent with that objective. That is a great deal more than could be said for any of the EEC budgets regularly commended to the House by Labour Ministers when they were in Government.
Secondly, the Opposition complain that the budgets before us
fail to achieve a broad balance between the United Kingdom's contributions and receipts".
That complaint comes from a party which, when in office, huffed and puffed a great deal but at the end of the day achieved precisely nothing in mitigation of the imbalance. In 1978, the Labour Government's final year of office, the United Kingdom's net contribution to the EEC budget was £804 million—or about £1,100 million at today's prices—and was on a sharply rising trend. This year, as a result of the tough and successful negotiations that we concluded on 30 May last year, our net contribution is expected to work out at £574 million—half what it was during the Labour Government's last year in office.
Thirdly, the Opposition complain that the 1982 budget makes:
inadequate provisions for regional, industrial and social policies".
The House will be interested to know that the total provision for such policies in the 1982 budget is £1,129 million, which is a record figure.
The Opposition further complain that the 1982 budget commits:
over 60 per cent. of the Community's total expenditure to the support of the Common Agricultural Policy".
I assure the right hon. Member for Battersea, North (Mr. Jay) that that is perfectly true, but in 1978—Labour's last year of office—it was 80 per cent.
There is only one word for the Opposition's amendment—humbug. To say the least, it is also a disingenuous amendment, because the whole House knows what really lies behind it. It is not a desire to reform the Community budget at all, nor to secure justice for the United Kingdom within that budget, both of which are at the very heart of the restructuring exercise on which we and the rest of the Community have already embarked. What lies behind it, although they seem curiously reluctant to come clean about it, is the fact that the Labour Party is now firmly committed to total United Kingdom


withdrawal from the European Community, regardless of the consequences for United Kingdom industry and British agriculture. [Interruption]. I note that Labour Members cheer at the consequences of withdrawal.

Mr. Teddy Taylor: If, as my right hon. Friend says, the Labour Party is now advocating withdrawal and he is saying that this would have serious consequences, is it not about time, as I and other hon. Members have urged, that we had an authoritative independent study of the economic consequences of the United Kingdom's membership of the EEC? Why will not the Treasury or anyone else get down to it?

Mr. Lawson: Many figures are published, probably too many, but this is not merely a question of figures. In any event, if my hon. Friend were to ask British agriculture and British industry where they thought their advantage lay, he would get a clear answer, and they should know what they are talking about.
When in office, Labour gave the British people the choice in a referendum — a choice that the people exercised in no uncertain manner. No doubt the people were influenced by the eloquence and the experience—[HON. MEMBERS: "Of Mr. Roy Jenkins."] No, it was not just Mr. Roy Jenkins. I think that they were influenced rather more by the then Labour Prime Minister, the right hon. Member for Huyton (Sir H. Wilson); the then Foreign Secretary, the right hon. Member for Cardiff, South-East (Mr. Callaghan); and the then Chancellor of the Exchequer, the right hon. Member for Leeds, East (Mr. Healey). All of them agreed most vigorously and argued that it was vital that we remained within the EEC. Where do they now stand in relation to the Labour Party's new policy?
The Labour Party is for total withdrawal without even so much as a referendum. Why does it want to get out? I assure my hon. Friend the Member for Southend, East (Mr. Taylor) that it is not for the reasons that he would like to get out. The Labour Party wants to get out because it believes that the Socialist policies of a future Labour Government would not be possible within the framework of the European Communities.

Mr. Anderson: What about President Mitterrand?

Mr. Lawson: As the hon. Gentleman has just pointed out, we have a Socialist President and Socialist Government in France who are committed to the most far-reaching Socialist measures, including nationalisation on a massive scale. Yet President Mitterrand is confident that what he seeks to do is compatible with the framework of the EEC, and there is no talk of France wishing to withdraw.
It is clear that the Socialism of President Mitterrand—this is the only conclusion that one can reach—must be a very mild brew indeed compared with the extreme policies to which the Labour Party is now committed, although it says little about them. The mind boggles, but the nation is warned.
On many occasions the House has debated the Community's financial problems. Legitimate concern has been expressed about the balance of expenditure in the Community budget between agriculture and non-agriculture programmes, about financial control in the

Community and about the effect of the budget arrangements on the United Kingdom. None of those problems can be easily solved, but I believe that we are beginning to see distinct progress.
As to financial control, there is now distinct evidence that the approach of the 1 per cent. ceiling is creating a new mood in the Community. The Commission, the Council of Ministers and the European Parliament are all being forced to take hard decisions about priorities and value for money. The old attitude of settling the policy regardless of its cost is fast disappearing.
There is the special United Kingdom problem which is of great concern to all hon. Members. During 1981 we have received substantial refunds. Provision for further refunds is included in the draft budget for 1982. Following the 30 May agreement, the Commission has made a proposal in its report for solving the problem in the longer term.
I concede that none of these are revolutionary developments. None of them fully dispose of the anxieties expressed in the House on many occasions, although they dispose of the Opposition amendment. I have no doubt whatever that we are slowly progressing towards a saner Community budgetary policy, and on that basis I commend the motion to the House.

Mr. Peter Shore: I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:
calls upon Her Majesty's Government not to approve the Preliminary Draft Amending Budget No. 1 to the General Budget of the European Communities for 1981, nor the Preliminary Draft General Budget of the European Communities for 1982, as they make no basic reform in the EEC Budget arrangements or in the Common Agricultural Policy, fail to achieve a broad balance between the United Kingdom's contributions and receipts, make inadequate provisions for regional, industrial and social policies and continue to commit over 60 per cent. of the Community's total expenditure to the support of the Common Agricultural Policy.
Having read the motion, I can well understand the Financial Secretary's sensitivity. I can well understand why he should worry about returning to the whole question of the proper contribution which the United Kingdom makes to the EEC. Like the right hon. Gentleman, I shall work my way through these volumes of documents and shall attempt to deal with most of these questions in a reasonable order.
This is the first debate on Community affairs since the United Kingdom took over the Presidency of the Council of Ministers at the beginning of July. I can only hope that the Government will use whatever facilities that office provides to reinforce the British case and will not use it to arbitrate between British and Community interests. Frankly, I am not terribly impressed and encouraged by the thought that the right hon. Gentleman will preside over the budgetary Council and that the Minister of State will advocate British interests under his guidance and chairmanship.
I expected the Financial Secretary to make some play of the proposed increases in the 1982 preliminary draft budget on non-agricultural expenditure, and he did not disappoint me. However, he was absolutely right to point out that there is a world of difference between what the Commission proposes and what the Council of Ministers disposes. Indeed, it is optional expenditure as distinct from non-optional expenditure and, as we know, optional


expenditure can easily be the first casualty in any major tussle between the Assembly and the Council of Ministers or when economies must be made.
As the right hon. Gentleman and the House well know, agriculture remains at the heart of the EEC budget. The guarantee section of the CAP will take just over 61 per cent. of the budget total in 1982, compared with about 63 per cent. in the amended budget for the previous year, which is also before us. The guidance section of the CAP will take a further 3½ per cent.
The fall in the percentage that has gone to the CAP in the last two years does not reflect positive decisions by the EEC to cut down on its allocations for the common agricultural policy. Indeed, the decisions of the Council last April on agricultural prices resulted in an increase of nearly 500 mua in support of agricultural prices and other related programmes. The decrease in total expenditure, as the Financial Secretary indicated, came about largely from a rise in world prices. If world prices were to fall substantially, there would be a total budgetary catastrophe and financial ruin would befall the EEC as it approaches the margin of the own resources.
There are, I understand, two savings. The first is that when world prices rise, the cost of the enormous expenditures that the EEC undertakes in the form of export restitutions, the subsidising of otherwise high-cost surplus EEC agricultural production and the subsidising of those surplus exports on world markets inevitably falls. The other factor, I am told, that contributes to the saving is the high rate of positive monetary contributions—compensation amounts—that are charged in the accounts of the budget as negative expenditure. We in Britain are now making a substantial contribution in that form since we have very large positive MCA payments.
Nevertheless, these developments have made possible some savings in the amending budget of 1981 and also some additional proposed expenditure under the regional, social and industrial chapters for the draft budget of 1982. While the specific policies are to be increased under the Commissions proposals by, I think the Financial Secretary said, 38 per cent.—although some of the figures may represent a difference between commitment and appropriation of 50 per cent.—it should be remembered, as the Commission's document observes, that
in absolute terms the total funds involved"—
regional, social and industrial—
are small compared with the importance of these projects for the future of the Community.
Indeed, they are.
The argument and underlying purpose are stated in the first sentence in volume 7A—the dominating volume of the whole batch of documents of the Commission's preliminary draft budget. It says that
in drawing up the 1982 budget the Commission has sought particularly to enable the Community to respond as effectively as possible to the demands placed upon it by the continuing economic recession".
The economic recession has indeed deepened, as hon. Members will recall from the document that was submitted to the recent European Council meeting in Luxembourg as a background paper. In the Community as a whole, GDP in 1981 is expected to be minus 0·4 per cent. Unemployment, which was 6·1 per cent. last year, is running at 7·7 per cent. in 1981. This means that more than 8 million men and women are unemployed in the EEC as a whole. The position in Britain, of course, is far worse than the Community average. It is not 7·7 per cent.
unemployment for us; it is 10·5 per cent. While the Community average shows a decline of 0·4 per cent. in GDP, our decline is no less than 2·2 per cent. Yet again, while the EEC as a whole expects to raise its GDP by around 2 per cent. next year, our own GDP, if the forecasts are correct, will at best rise by about one half of 1 per cent.

Mr. Arthur Lewis: My right hon. Friend says that unemployment in this country is 3 million while in the EEC as a whole it is 8 million. That is a difference of 5 million. We are told every day, from the Prime Minister downwards, that our unemployment is due to wicked workers receiving too-large wage increases, that they will not work, and so on and so forth. If the figure for the rest of the EEC is 5 million, is it the case that its workers are also getting too much money and will not work?

Mr. Shore: Of course not. My hon. Friend knows the answer to his own question. There are two separate factors. There is indeed a world recession. Other countries in Europe are experiencing its effects in terms of unemployment. One can only hope that those who manage the affairs of the larger industrial nations meeting in Ottawa at this time will show greater wisdom in tackling this problem than they have shown in the past. Quite separate from that is what I would describe as the Thatcher factor in British unemployment. There is no doubt that the peculiar and special policies pursued by this Government and by Treasury Ministers have done extra damage to the economy of our own country.
The main point is, unhappily, that unemployment has risen and is likely to rise further not only in Britain but in the EEC as a whole. Against this background we have to assess the increase in expenditure or proposed expenditure on social policy, regional policy and industrial policy. It is here that matters must be seen in proportion. Regional policy in the 1982 preliminary draft budget is increased for the whole of the Common Market by £250 million, if that is approved. The social fund is raised by approximately £170 million and the whole range of industry, energy, transport and research policy by some £75 million. The sum of all these increases is rather less than £2 per head per annum for the 250 million people in the EEC—a programme equivalent of an increase in expenditure of £100 million in the United Kingdom.

Mr. David Myles: Will the right hon. Gentleman accept that an element of the common agricultural policy budget is directed towards social policy in the countryside, and especially the less favoured areas?

Mr. Shore: There are some such expenditures. I can only say to the hon. Gentleman that we certainly pay for them.

Mr. Anderson: Will my right hon. Friend speculate on the amount that we shall get from the pot when the much poorer Iberian countries, with their high populations, enter the EEC in 1984, demanding their own portion from a relatively small source due to the constraints of the VAT own resources ceiling?

Mr. Shore: If regional policy, which is pretty inexact, reflects differences in GDP in various parts of the EEC, it is bound to be the case that funds will be allocated to those countries with the lowest GDP. Portugal, Spain and Greece must therefore be among the main claiming areas of the European Community.
It is difficult to believe that the amounts that I have listed will make any noticeable difference to the economic performance or employment prospects of the EEC and the countries and regions within it. With the guarantee expenditure due to rise by a further 12 per cent. on the CAP and with the guidance section continuing, and totalling together some 64 per cent. of total Community expenditure, the EEC remains what it has always been—a customs union with a common agricultural policy. As the House knows and as the Financial Secretary properly put it to us, the EEC is approaching the ceiling of its so called own resources. Agricultural levies and customs duties go automatically to the Commission, but VAT, under the 1970 agreement, is limited to 1 per cent. of the total yield. In the budget now being discussed for 1982 the call-up of VAT will reach 0·95 per cent. of the authorised 1 per cent. Even this year supplementary expenditure could take the EEC to the limit of its own resources and beyond.
Next year for certain the EEC budget will rise well beyond the 1 per cent. ceiling. The much-heralded crisis of Community finance will break. Given the closeness of the budget appropriation to the ceilings of revenue, it is extraordinary that in its general comment on the 1982 draft preliminary budget the Commission makes no reference to this matter. Nor does it confront the problem of what it will be obliged to do if, through supplementary provisions, perhaps caused by a fall in world food prices, the ceiling is reached and breached this year.
The next major matter raised in our amendment is the continued and unacceptable net contributions that this country pays to the EEC. The 1982 draft preliminary budget and the 1981 amending budget both record and reflect the agreement reached by the Prime Minister in May 1980. It was and remains our contention that it is ludicrous and unacceptable that the United Kingdom should be the second largest net contributor to the EEC budget. During 1979 this House, without a Division, twice supported an Opposition motion calling for an agreement which would ensure that the United Kingdom's receipts were at least not less than the United Kingdom's contributions. It was the Prime Minister herself who, during that period, took the lead in demanding a broad balance. The Chancellor of the Exchequer "marvelled" at his own modesty in making such a demand. It is a very different tune that we have been hearing since then from the Government Front Bench.
In the event, we have had to settle for payments in 1980–81 and 1981–82 which are little less than half the peak figure which was paid in 1979–80. We have had to accept, in short, somewhere near that half a loaf that the Prime Minister rejected before the deal was concluded. Although we shall still be paying, in current terms, over £l billion in net contributions for 1980–81, the budget documents reveal just how insane were the original agreements that were made in relation to the United Kingdom's contributions when the right hon. Member for Sidcup (Mr. Heath) signed the Treaty of Accession.
As the table on page 96 of the 1982 budget so clearly shows, the own resource system bears extremely harshly on the United Kingdom. We pay substantially more than any other EEC country, through levies on imported agricultural products. We again pay more in customs duties than any other EEC country, with the exception of Germany, whose payments are only just above ours. In

payment of VAT we are the third largest contributor, with Germany first and France second. The total United Kingdom payment of our own resources is higher than that of any other country except Germany.
I confess that while I judged from the start that the agricultural levies and customs duties would have this massively adverse effect upon our position as a contributor, I am surprised that the 1 per cent. VAT payment does not reflect more closely the relative gross domestic products of the United Kingdom, France and Germany. If German's GDP is twice that of the United Kingdom, and if France's GDP is now 50 per cent. higher than ours, it is, on the face of it, surprising that Germany's VAT contribution should be only 23 per cent. larger than ours, and that of France only 9 per cent. larger than ours. If the Financial Secretary has any explanations to offer on that matter, I shall be interested to hear them.
Nevertheless, whatever the explanation may be, under the own resource system, Britain, with some 16 per cent. of the total Community GDP, makes a gross payment, of about 21 per cent. of the total, and although our gross contribution is about 21 per cent., our share of gross receipts is only about 9 per cent., reflecting above all the relatively small expenditures of agricultural support in the United Kingdom.
We are all conscious of the fact that the May 1980 agreement was not the permanent settlement upon which the Prime Minister had originally insisted but a temporary device to last for two or, at the most, three years. The difficulty and dangers of this kind of arrangement are well illustrated in the 1982 preliminary draft budget.
As the House will recall, the arrangements that followed the agreement of May 1980 led to two regulations providing for a reduction in the United Kingdom net budget contribution. The first was to provide for a partial refund under an amended version of the original financial mechanism negotiated in 1975. The second regulation provided for Community contributions in respect of certain United Kingdom public investment programmes under a scheme of so-called supplementary measures for the United Kingdom.
The original financial mechanism was seriously defective—as some of us, as the Financial Secretary might note, said at the time. We made that one of the principal reasons why we rejected it and took the position that we did in the referendum, when the Financial Secretary and all those others who are now, as it were, teasing us, were only too happy to lend their voices to those who proclaimed that we had the most satisfactory result, that all was well and that Britain was, happily, now a member of the EEC. That was not the view that we took, as the Financial Secretary knows perfectly well, and we argued against it.

Mr. Lawson: As the right hon. Gentleman has repeated what he said at the time, perhaps he will say what his right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) said at the time, when he was Foreign Secretary and was in charge of those matters for the then Government, and subsequently became Prime Minister.

Mr. Shore: The then Foreign Secretary said at the time exactly what the present Financial Secretary said at the time—that he was in favour of it. What we are now arguing about is between those who were in favour of the 1971 and 1975 settlement and those who denied it and argued against it from the start. I have never accepted it.
I come to the financial mechanism. I said that it was seriously defective. But it is remarkable that, with the experience of the inadequacies of the 1975 mechanism, the revised financial mechanism, which was negotiated by the present Treasury team, has shown itself to be equally defective. As the preliminary draft budget for 1982 reveals—and it really is a joke—
the financial mechanism will not be triggered in 1982: calculations from the latest figures suggest the United Kingdom's contribution to the 1981 Budget will not be more than 10 per cent. higher than it would have been if the member State budget contribution were a function of their share in Community GDP.
That all sounds rather like gibberish, but this is one of the trigger mechanisms of the financial mechanism as revised, with all the skill and knowledge of the Financial Secretary and his colleagues.
The trigger will not work. That is mainly because the rise in the value of sterling relative to the ECU has increased the United Kingdom's share in Community GDP. So, as we have become poorer, in statistical terms we have become richer, we have a larger share of the GDP, and the financial mechanism so carefully examined, re-examined and redesigned, with all the skill which the Financial Secretary could bring to this task, has been shown to be totally inadequate and incapable of being used.
In order, therefore, to meet the obligation under the 30 May agreement, the Commission has placed the total refund under the heading of "Supplementary Measures", which is the alternative route to repayment. That is not a simple matter. The refund to the United Kingdom through the supplementary measures is itself governed by the conditions laid clown in the relevant regulations. The £800 million involved can be spent only on capital projects undertaken by public authorities that fulfil the following criteria, laid down in Commission regulation No. 2744/80.
The first criterion is that they must contribute to the economic and social development of the United Kingdom. The second is that they must contribute to Community integration. The third is that they must ensure, in a diversified manner, the development of economic and social infrastructures. The fourth is that they must not be incompatible with a Community policy. The fifth is that they must not give rise to distortions of competition. The Commission has the right to invigilate the programmes and must not contribute more than 70 per cent. of the annual expenditure cost of each sub-programme.
The amounts paid to the United Kingdom, are, as we know, to be paid in the following year. But if the United Kingdom wants advance payments it will require a qualified majority in a vote on the proposal from the Commission in order to obtain it.
The next point is a good one. The United Kingdom, in agreement with the Commission, is to take the necessary steps to ensure that "suitable publicity" is given to the assistance granted under this regulation. I emphasise the phrase "suitable publicity". No doubt that is why, all over the country, particular projects are publicly identified as reflecting the benefit that the United Kingdom obtains from membership of the EEC and the generosity of its partners. The truth is that our money is simply coming back to us. Even then, only a part of the amount that we are forced to pay comes back.

Mr. Tim Renton: Given the right hon. Gentleman's vehemence, are we to assume that he is coming to the heart of the matter? Is it now the right hon.
Gentleman's view that come what may—budget restructuring or no—the United Kingdom should get out of the EEC? Is that also the view of his leader and deputy leader?

Mr. Shore: I shall come to that point later, because I am now discussing the budget—[HON. MEMBERS: "Answer the question."] I shall answer the question.
When the House discussed the agreement of 30 May 1980 the Chancellor of the Exchequer made his main claim not the reduction in the extortionate sums that we would otherwise have been paying but the agreement that had been reached to make a fundamental review of Community policies, so that "unacceptable situations" would not arise in the future and particularly in the period in which these temporary arrangements came to an end. As the House will recall, the Commission was required urgently to study the problem and to report not later than 30 June 1981. It was our strongly expressed view at the time that the Commission's terms of reference were seriously if not fatally limited by the instruction to examine the development of Community policies
without calling into question the common financial responsibility for these policies which are financed from the Community's own resources or the basic principle of the Common Agricultural Policy.
Since the principal problem of the budget is the extraordinary mix of taxes that form "own resources", and since the principal imbalance in the budget expenditure is the structure and basic principles of the CAP, it seemed to us then that the possibilities of major reform were remote.
We now have the Commission's report on its mandate. Indeed, the Financial Secretary referred to some of its features. In the preliminary draft budget for 1982 the Commission acknowledges that it was unable to incorporate the conclusions of the study, which was published on 22 June. However, it obviously believes that the balance in the 1982 budget—particularly the reduced share going to the CAP guarantee section—is "a step in the right direction". It rather optimistically offers to amend its proposals for the 1982 preliminary draft budget if recommendations on its mandate are given immediate effect by the Council. I must say that I find the Commission's report on its mandate extraordinary and unsatisfactory.
I do not know whether hon. Members have had an opportunity to read the document. If they have not, I hope that they will make an early appointment with themselves to do so. Out of 28 pages of prose, the Commission devotes itself to only two pages on the United Kingdom's unacceptable situation. It is not surprising—knowing the Commission—that it has taken an opportunity to read a moral lesson to the nation States of the EEC. It has taken an opportunity to restate its old belief in the further integration of member States and, in particular, in the great goals of economic and monetary union that it has proclaimed since and even before 1972.
When at last the Commission reaches the CAP—I believe on page 12—it endorses its three main principles of market unity, Community preference and financial solidarity, and makes proposals for reform which have an all too familiar ring to most of us. Of course, it draws attention to the necessity of narrowing the gap between Community prices and the prices of its main competitors in the outside world. It believes in the modulation of guarantees in line with Community production targets and


in an active structures policy. It calls for tighter financial control by the Community in the management of its CAP expenditures, and for stricter discipline in relation to national aids to avoid undermining Community policies.
As all of us who have studied these things—going back to the days of Mansholt—will recall, this is familiar stuff. What the Commission proposes to remedy the "unacceptable situation" of the United Kingdom is, against this background, no more than an extension, with a new formula, of the existing special arrangements. Since, according to the Commission, the main reason for our vast net contribution to the Community is that we do not obtain a proper proportion of the guarantee section expenditure of the CAP, and since it clearly believes—contrary to what it says elsewhere—that the guarantee section expenditure will continue to form the bulk of the budget, it proposes that the United Kingdom's future refunds should be based on a new mechanism, which compares the United Kingdom's share of Community gross domestic product with its share of receipts for CAP expenditure.
As the Financial Secretary rightly pointed out, no exemplifications are provided, so we have no idea what the result of such a formula might be. However, the passages that I read did not contain a very positive or sympathetic note in relation to improving, or even sustaining, the level of refund that the United Kingdom has recently obtained. It was particularly interesting to note how it was proposed to finance the continuing cost of partial restitution of excess contributions by the United Kingdom. The Commission's first and most hopeful proposal for financing it is to breach the 1 per cent. VAT and to increase the totality of own resources. That is its preferred and clear solution and much pressure will be applied towards that end. Otherwise, it is said that it could be financed by other member States making an abatement on a percentage formula of their receipts from the CAP guarantee section.
The prospect of major changes in the nature, structure and workings of the CAP, as well as changes in terms of refunds from other member States is—based on all experience—remote. Far from being a permanent solution, the Commission proposed that the new measures should apply for a limited period, but long enough
for the effects of the new guidelines it proposes to be felt. The position would be reviewed before the compensation system expires, notably when a decision is taken on creating the additional own resources needed to implement common policies.
Once again, there is a suggestion of tutelage. The Commission states:
The funds made available to the United Kingdom should be used to finance activities in that country which accord with community policies and are designed to increase convergence of the economies.
I am sure that no hon. Gentleman would claim that we have a solution for the unacceptable situation that the Treaty of Accession and the structure of own resources and Community expenditures have imposed on the United Kingdom.

Mr. Russell Johnston: rose—

Mr. Shore: I cannot give way.
Indeed, the Chancellor of the Exchequer's speech of 2 June made it plain that he would not accept an increase in "own resources" as a prior condition for working out a

solution. That is something. It should be clear to everyone that the concessions won by the Government on 30 May 1980 were very limited, both in amount and in time. What is now proposed is a modification of that limited settlement. it is a modification that will carry forward all the opportunities for exerting further pressure on the United Kingdom to fit in with Community policies. There is a clear implication that we should join the EMS and support the enlargement of own resources when the ceiling has finally been reached.
In addition, there is the obvious and unacceptable continued invigilation of United Kingdom's affairs in order to justify the paying back of our own money in the years ahead. The adjustments that have been recommended to the CAP are modest. In any event, they are unlikely to be accepted by those who benefit from its existing provisions. There is no mention anywhere of the whole unacceptable doctrine and mix of taxes that comprise own resources.

Mr. Lawson: Will the right hon. Gentleman give way?

Mr. Shore: The right hon. Gentleman has had plenty of opportunity.

Mr. Lawson: Will the right hon. Gentleman give way?

Mr. Shore: The right hon. Gentleman's interventions have not been especially constructive, and he should allow me to complete my speech.

Mr. Lawson: rose—

Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. The Minister should know that the right hon. Gentleman does not intend to give way and that he must resume his seat.

Mr. Shore: I have given way to the right hon. Gentleman already. He opened the debate and has the pleasure of winding up. I am not afraid of the Financial Secretary. I put it as directly and simply as that.

Mr. Lawson: Will the right hon. Gentleman give way?

Mr. Shore: The report of the mandate of the Commission of 22 June is to be discussed substantially at the November meeting of the European Council in London. It is crucial that the House has a full statement of the Government's approach to the proposals—I do not consider that what the Financial Secretary has said forms a clear statement—and a debate before the summit in late November. I give notice that we shall demand just such a debate when the recess is over. Beyond that, we look forward to the day when there will be no British contribution to the EEC Budget; to the day when, in a different and new relationship with our Continental neighbours, we in Britain are outside the whole crazy system of the EEC budget and own resources.
Today we are discussing the 1981 and 1982 draft budgets. For the reasons stated in my amendment and my remarks the Opposition will vote to reject them.

Mr. Tim Renton: I have sympathy for and am in agreement with the right hon. Member for Stepney and Poplar (Mr. Shore) on one point—the sheer weight and volume of the documents that we were meant to read prior to the debate. I obtained them, as doubtless many other hon. Members did, from the Vote Office this morning. I weighed them. They weighed 1,620 grammes,


or approximately 3½ old British pounds. While I have sympathy for what the European Commission is trying to do in its proposals, on the 1982 draft budget and its modest steps towards restructuring, I agree with the right hon. Gentleman that, by and large, much of what is contained in the papers is difficult to comprehend—to put it mildly. One has to dig deeply to find comprehension.
I declare an interest, in that I am strongly pro-European, both emotionally and intellectually. I have heard far too much from small firms in my constituency who are thriving on their export orders for engineering and electrical components from other Common Market countries. I have heard far too much from the leaders of major British companies such as Shell and ICI, who tell me that they would not be building new plants in Britain if we were not members of the European Community. I hear too much ever to believe that withdrawal from the Community is a reasonable option open to us. Ford would not have built its new plant at Bridgend, in South Wales, if we were not members of the Community.
However, I must make it plain that I am not one of those who are so blind in their love that they cannot see the warts or the delinquent tendencies of those of whom they are fond. That caution applies to the direction that the European Community is taking at present.
I was struck by a recent publication that I received, entitled "Facts", and published bi-monthly by the European Movement. The most recent edition, which I suspect all hon. Members received, has—[Interruption.] —I should be delighted to lend my copy to any hon. Member who did not receive one. The front page is headed
Britain in Europe—a success story,
and immediately underneath, in the second paragraph, there is the sentence:
Our problem in Britain is widespread ignorance about the Community.
That strikes me as analagous to those who have put on a performance of "Macbeth". As the curtain comes down the actors playing Macbeth and Lady Macbeth tell each other that they were brilliant and that they had never played better, and that even Malcolm made the best out of a very boring part. Meanwhile, the audience is hissing and booing and throwing things at the curtain.

Mr. Arthur Lewis: No one is there.

Mr. Renton: In fact, everyone is there and watching. Who is right, the actors or the audience? At the end of the day the audience is right, because its members are the market. They are the people who pay. Unless they like a play they will not turn up and there will be no play in the future. It is against that background that I make my remarks.
Many of the documents are difficult to comprehend. The procedures of the Community must be simplified, and that goes for much of the paper work that is produced. I find it difficult to understand why the common agricultural policy, which in the past has taken as much as 80 per cent. or more of the European budget—even in 1982 under the revised procedures it will take 61 per cent.—is blamed by the dairy and pig farmers in my constituency in Mid-Sussex as one of the factors for their present distress, yet it is that policy that consumes so much of the Community's resources.
Farmers in my constituency, like those elsewhere in Britain, find that much of what goes on under the label "CAP" is incomprehensible in its documentation and the

terms used. We are all deeply worried about such absurdities as the same consignment of butter passing backwards and forwards between Northern Ireland and the Republic of Ireland, drawing a subsidy each time until it goes rancid.
Such problems must be sorted out. The general aim of the Commission, supported by all the Ministers who wish to see it succeed, should be to ensure that over five years the expenditure of a far more comprehensive CAP is reduced to not more than 50 per cent. of the total European budget. There should be no commitment to increase "own resources" above 1 per cent. of VAT until that target and the means of achieving it have been agreed by all the Ministers concerned.
In the budget papers it is intended that 36 per cent. more should be spent on the regional and social funds in 1982. I welcome that development. It is clear that much more than is commonly recognised has been done by those funds in this country. For example, much money has been spent by the funds specifically on helping to create new jobs in new industries in the depressed steel towns of the United Kingdom. Unlike other hon. Members—who made noises against that earlier—I believe that when such money is spent there should be a clear requirement that the local community should know that some of the money has come from the European regional or social funds. Signboards should be put up.

Mr. Teddy Taylor: Will my hon. Friend give way?

Mr. Renton: No. My hon. Friend will have an opportunity to speak. I do not wish to take up much time.
Signboards should be erected explaining how much money has come from European funds to help build a new factory or motorway and to create more jobs on a local industrial estate.

Mr. Marlow: Will my hon. Friend give way?

Mr. Teddy Taylor: Give way.

Mr. Renton: No. My hon. Friends must not remain sedentary and interrupt me. l shall not give way.
When hon. Members protest about such signboards, I cannot help but believe that they are frightened and do not want people in our depressed towns and cities to know how much the EEC is doing for them. Let us clear that up. Let us have the signboards. I have seen such boards in Kenya and other parts of Africa, and they are a great help in making it known what the Community does.

Mr. Marlow: Where does the money come from originally?

Mr. Renton: I shall not give way to my hon. Friend.
Ministers could be more aggressive about letting the facts be known. I tabled a recent question to the Secretary of State for Industry. I asked him to comment on the statement in the Official Journal of the Council of European Communities that
the Community regional policy in particular, which relies on aid from the ERDF, has helped create or maintain during the period in which the latter was in operation (1975–1979), 339,317 jobs in the Community as a whole, including 99,767 jobs in the United Kingdom.
Perhaps the Financial Secretary will pass on my comment to the Under-Secretary of State, because the reply, after two bites at the cherry, was so drawn by a civil servant that I was not certain whether the answer was


"Yes" or "No". It would be better if the Government were a little more firm in giving credit and ensuring that the European—

Mr. Marlow: Will my hon. Friend give way?

Mr. Renton: I am attempting to talk to the Chair over the blond head in front of me. I hope that Ministers will be more firm in ensuring that the European regional development fund gets the credit for its help in job creation.

Mr. Marlow: Will my hon. Friend give way?

Mr. Renton: No. I turn now to the question of the European monetary system. It is covered in the budget documents by reference to interest payment made to the EMS. I confess that although I was enthusiastic about the EMS when it was first announced in 1978, I have, in the last two years, been a sceptic. However, I am now coming round to the view that, bearing in mind the desperate need in British industry for greater currency stability, we should positively consider in the next six months the question of joining the EMS.
Lord Lever's two articles in the Financial Times last week pointed out how much damage can be done to British industry by the speed with which hot money moves round the financial markets of the world and the speed with which currencies go up and down. If the EMS has made one positive achievement in the last two years it is that it has achieved relatively much greater stability for the currencies within it than sterling has experienced.
It is possible to think of the EMS not as the currency snake or super-snake that my right hon. and hon. Friends regarded it as two and a half years ago but more as a European snail that slowly and steadily takes movements in one direction—that of stability. Clearly, our currency has particularly suffered over the last two years because it was suddenly recognised as a petro-currency. Consequently, it went up by 30 per cent. against the dollar and came down by 30 per cent.
My right hon. Friend the Financial Secretary feels understandable caution and scepticism about the matter. I submit to him that we have got over our initial shock of having a petro-currency and that we are more settled back in our normal role of having a relatively poor industrial base and relatively high inflation but a good trade balance because of our oil. We might expect to remain in that position.

Mr. Hugh Dykes: Will my hon. Friend give way?

Mr. Renton: In all fairness, I shall not give way. I am impartial in my obduracy.
As sterling has fallen by about 7 or 8 per cent. in recent months against the main European currencies and against the European unit of account, this is the moment to take seriously the words of the Governor of the Bank of England. He said that we should participate fully in the EMS at the proper time. My right hon. and hon. Friends should think joining the EMS not just as a token of our commitment to Europe at the important time when we are holding the Presidency but because it would be of great practical value to British industry. After all, British

industrialists are in business to export their modern products at competitive prices all round the world. They are not in business to have to be currency speculators.
I have asked for much more simplicity and a much better presentation of the European Community's documents, including the budget. It is important that in the difficult years ahead the British public should have a much better and clearer perception of what the European Community is doing for them.
With that said, there must also be a European ideal. Our Ministers, examining the budget in the six months ahead, must go to the relevant meetings not just thinking "What can I get out of this for my country?", but also "What can I put in for Europe's sake?"
It is significant that the one major initiative on which Community Ministers have managed to agree in the last few months is Afghanistan. That is a long way away and does not affect any of our internal interests. Ministers should address their minds to what they would do and how they would react if Russian tanks went into Poland and if West Germany then felt threatened with the Russian tanks so close to it. The Ministers should consider what would happen if the German mark then came under threat and developed great weaknesses. European Finance Ministers should consider the possibility of such pressures. That is what the European Community should be about.
If the discussion about budget reform is merely a squabbling ground for national interests it does not deserve to succeed. It it is a breeding ground for European interests and overall West European growth. It can, should and will succeed.

Mr. Douglas Jay: I agree with the hon. Member for Mid-Sussex (Mr. Renton) that there should be more publicity about the EEC because the more that the British public know about the EEC the more they are against it.
The Financial Secretary today and the Treasury's explanatory memorandum on the 1982 EEC budget show that there is little change in the budget or the CAP mechanism, except that the total expenditure is becoming larger and larger. Total EEC spending on the commitments basis rises again in 1982 by over 10 per cent., to about £12 billion. The total cost of the agricultural guarantee fund—that is the CAP cost of storing surplus food and subsidising food exports to the Soviet Union and elsewhere—is to rise by another 12 per cent. from 1981 to 1982. That is presumably partly because of the surrender of our Minister of Agriculture, Fisheries and Food on food prices this spring, when he agreed to further rises. I understand that the CAP will continue to swallow between 60 and 70 per cent. of EEC expenditure in 1982. Perhaps the Financial Secretary will tell us precisely what the percentage will be in the Commission's present plans.
It also emerges from the Treasury paper that the gross contribution of the United Kingdom for 1982 will total 23 per cent. of the entire EEC budget at £2,700 million. There is not yet any information available about what refunds the United Kingdom will receive in 1982. We know that the gross payment will be approximately £2,700 million. The Financial Secretary has told us that there will be some belated refunds accruing to us in 1982 but we do not know so far what they are or what our net payment will be in that year. Perhaps we can at least be enlightened about that tonight.
The reliefs negotiated in May 1980 come to an end before the end of 1982. Though the Financial Secretary did not mention it, the Government completely failed to put forward any proposal of their own for basic reform either of the budget or the CAP thereafter. All we have as a result of the lack of proposals from the United Kingdom Government is the document from the Commission, dated 24 June this year, entitled "Commission Report on the Mandate of 30 May 1980".
Commission reports always read as if they were first drafted in Paris. This one is no exception. It is a most disappointing document—so disappointing that the Financial Secretary said little about it. It has no precision and no figures. but many Brussels clichés and dogma. Like the hon. Member for Mid-Sussex it would like to force everybody into the straitjacket of the European monetary system—that is one of the few things which are clear—which it calls "monetary stability".
The Commission is also anxious that the 1 per cent. VAT ceiling should be removed, to give it more revenue for more expenditure. The Financial Secretary did not mention that. Here the Commissioner's main thesis is wholly contrary to everything else that he said this afternoon.
The report then says about the CAP:
the result of 20 years of the application of CAP is positive".
That is a remarkable judgment; but what does it mean? It reveals a remarkable state of mind on the part of the Commission. The report goes on to say that it is
neither possible nor desirable to jettison the mechanism of the CAP
It makes a few timid suggestions on adjustments for this year and continues:
these guidelines for the reform of the CAP leave the principles on which it is based intact.
Indeed they do.
The future of the British budget contributions is mentioned only in a short passage near the end of the report, as my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) pointed out. Again, the proposals are vague and timid, with no figures, and they virtually depend on the 1 per cent VAT ceiling being removed. That is something which the Commission constantly assumes.
We are also told—believe it or not—that, in the words of the report, the new budget relief measures for the United Kingdom after 1982:
shall apply for a limited period.
In other words, even if all this were adopted the British economy would be threatened with yet another guillotine when the later deadline was reached.
If proposals for reform start like that—before the French Government have spent their usual nine or 12 months obstructing, delaying, vetoing and mutilating them—we all know how they will end up when that process is over: with no material reform of the CAP or any lasting relief in the budget burden on the United Kingdom. The Financial Secretary's speech certainly did not encourage me to believe that he would negotiate with sufficient vigour to prevent that conclusion.
Therefore, those who continue the pretence that such fiddling reforms can remove the economic burdens of EEC membership on the United Kingdom are misleading the public and, incidentally, delaying still further the recovery of the United Kingdom economy.
The chief burden on the United Kingdom is not the budget but, first, the extremely high agricultural protectionism of the CAP, which must force up food prices

against a food-importing nation such as the United Kingdom: and secondly the removal of all restraints on United Kingdom imports of manufactured goods. Both those basic policies are precisely the opposite of what our fundamental economic interest requires.
If the CAP raised food prices by only 5 or 10 per cent. above world prices that might be tolerable, though foolish. But EEC food prices have for years been, on the Commission's own figures, between 60 per cent. and 100 per cent. higher for grain, 100 per cent. higher for beef and lamb and 300 per cent. to 400 per cent. higher for dairy produce. On the most optimistic calculation, that means that the general level of retail food prices is at least 20 per cent. to 25 per cent. higher in the United Kingdom than would otherwise be the case.
Those excessive food prices work right through our economy and have been a major cause of rising pay claims ever since we adopted the CAP in 1973.

Mr. Arthur Lewis: And unemployment.

Mr. Jay: I shall come to unemployment in a moment. Ministers, particularly the Secretary of State for Employment, are fond of claiming in economic debates that retail prices and pay claims rose faster in this country from 1974 to 1979 than they did in the case of our Continental competitors. So they did; and the main cause was the imposition of the CAP on the United Kingdom economy between 1973 and 1978–79, as a result of the Treaty of Accession, which the Financial Secretary and most of his colleagues supported.
Ministers also claim from time to time that we lost export competitiveness in those years. That is true, arid one major cause is again what I have described. Those of us who opposed accession from the start always argued that it would have such effects on food prices, the cost of living and United Kingdom trade competitiveness.
There is no remedy now for this burden on prices and costs except to sweep away from the British economy the whole CAP mechanism of restriction and dear food and to restore the principle of free imports of food. Countries such as Australia and New Zealand would be more than ever glad to send us that food.
The second great folly of the 1972 treaty was the removal of all tariff restraint on manufactured imports from the Continent into the United Kingdom economy—incidentally, just at the moment when the CAP was forcing up our labour costs. For instance, it was the removal of moderate tariffs, which we had had for many years, on steel and cars in particular, which have devastated the British steel and engineering industries since 1974 and have probably added several hundreds of thousands, if not half a million, to our present unemployment figures.
It is no good people saying as they sometimes do, that those industries should have been able to stand that competition. If they could not stand it, it was folly to expose them to it. Some of us knew in advance that it should not have been forced on them until it was clear that those industries were able to meet it.
I think that Conservative Members have now at least grasped the fact that our present large oil exports to the Continental EEC, which have risen from about £100 million in 1970 to £4,000 million in 1980, have nothing to do with EEC membership, would have been much the same if we had not joined, and will remain much the same


if we withdraw. Our EEC membership has affected, first, food prices and, secondly, trade in manufactured goods, on which tariffs were removed on both sides.

Mr. Arthur Lewis: If my right hon. Friend is right, as I believe he is, will the effect not be accentuated when the Greeks, the Spanish and the Portuguese come in?

Mr. Jay: It will be accentuated to some extent, certainly with imports of manufactures. Let me give the story up to date. The result of the mutual removal of tariffs has been a change from a United Kingdom export surplus to the EEC Six in manufactured goods of £100 million in 1970 to a deficit of £2,900 million in 1980—a colossal swing against us of £3,000 million in the balance. That has been a major cause of increased unemployment during that time. Interestingly enough, it has taken place in a period when our trade balance in the same goods with the non-EEC world swing in our favour by more than £3½ billion. Those two figures prove beyond serious dispute that the tariff changes with the EEC Six after 1971 were the main cause of that swing into deficit.
Even more pertinent, those figures make clear that if the process were reversed—if the distortion of our trade by EEC membership were removed and a moderate industrial tariff were restored both ways—in all probability the proportion would swing back. One remarkable lesson of the eight years of EEC membership has been the smallness of our total trade distortion, in spite of the loss of Commonwealth preferences and the reversal of previous tariff policies. The change in policy and the 10 years' experience has affected only between 10 per cent. and 15 per cent. of total United Kingdom trade. Even now, only about 25 per cent. of our food imports appear to come from the rest of the EEC.
In 1970, 70 per cent. of our total trade was with the non-EEC world and 30 per cent. with the EEC. Now, after all these distortions and 10 years, we still do about 60 per cent. of our trade with the non-EEC world and about 40 per cent. with the EEC. Even if withdrawal from the EEC meant the reimposition of a moderate tariff on manufactured goods both ways, we should not cease trading with the Continental EEC altogether, as is sometimes said, and as was implied by the hon. Member for Mid-Sussex. We should in fact return to nearer the 30 per cent. of our total trade which prevailed before, and the balance would swing back in our favour. That is the overwhelming probability on the evidence before us. Far from unemployment increasing, the swing in the balance would mean a large net gain for United Kingdom employment.

Mr. Anderson: Would my right hon. Friend care to detail the third markets where our manufactured goods are likely to beat the Japanese and other manufacturers?

Mr. Jay: If we abandoned the CAP we should lower our labour costs, and our retail prices would be lower. That would give us a distinct advantage throughout the whole world during a period which I think would be much shorter than the eight or 10 years that we have already experienced.
Withdrawal, accompanied by some moderate industrial tariffs on the levels now permitted by GATT which, after all, we apply to our imports from the rest of the world,

would bring three immediate and decisive economic gains to the United Kingdom. First, free entry of food from the world's most efficient producers would hold down the RPI, restrain cost inflation, and improve our competitiveness, both at home and abroad. Secondly, a moderate tariff, at least for the time being—one would hope that it would not need to last indefinitely—on manufactured imports would save British industries from the near extinction that is threatening them today. Thirdly, a 200-mile exclusive fishing zone would be available to us instead of the almost total loss of any exclusive zone which is currently threatened. That is a vital matter, which we have not even discussed today.
Without at least the first two of those rescue measures, I do not believe that there is any possibility of a full economic recovery or a return to full employment for the United Kingdom economy.

Sir Brandon Rhys Williams: I am sure that no one, however convinced a European, would seek to defend absolutely the present shape of the European Community budget. I shall certainly not seek to do so. In my opinion it is much too small an annual sum for the objectives that it sets itself—or rather, that are set for it. Moreover, it is obvious that it has suffered a great deal of distortion due to political pressure. However, it could have been a great deal worse if it had not been for the exertions of the European Parliament since the direct elections. I have played a small part in that, and I am proud to declare my interest in that respect.
An annual budget of this size is not competent adequately to tackle provision for capital projects such as the restructuring of agriculture and the long-term social and industrial reorganisation that we are seeking in the Community. That is one reason for the many valid grumbles that we hear about the money not achieving what we want it to do. Could a sum of less than 1 per cent. of the Community's total production really tackle all that we are asking of it on the capital side?
In my view, the European Community is still living in the Stone Age. We try to achieve our long-term objectives with annual budgets, and we cannot carry over our long-term projects from one year to the next except in very limited ways. We are like the people in the Stone Age, who could look ahead only to the size of the subsequent year's crop. They could not make plans such as a group of industrialised, capitalist democracies ought to do.
I do not join in the present clamour to increase the 1 per cent. ceiling to perhaps 1½ per cent. or 2 per cent., because that, in itself, would not be enough. We have to look for more important departures in the way that we attempt to finance the Community than simply edging forward through the 1 per cent., although I imagine that that will happen in due course.
I understand what my right hon. and hon. Friends are seeking to do in insisting on keeping to the 1 per cent. ceiling, so as to force fresh thinking, especially about the way that we support the agricultural policy, but I should like to see the opening up of facilities for investment as part of the Community's plan, and it should be done on an ambitious scale.

Mr. Nick Budgen: Is my hon. Friend advocating an additional tax—an additional form of revenue to be raised by the EEC?

Sir Brandon Rhys Williams: I am glad that my hon. Friend has given me an opportunity to clarify my position. For the time being, I do not think that we should seek to break through the 1 per cent. ceiling. We should support the Germans in the view that they take, that the 1 per cent. ceiling should be the limit, at any rate for the time being. But I should like us to attempt to develop a capital account in the same way as each of the member States within the Community has a capital account for its national projects. It is futile to expect the Community to succeed without having a proper capital account.
I do not want to expand the current account. I want to see the development of a thoroughgoing capital account for the Community, and I think that this would be a proper project for us to suggest while Britain is in charge of the Community during the current six months.
I recognise that the European Investment Bank does very good work and that it has expanded beyond all the ambitions of its founders. Good use has been made of the Ortoli facility, which might be regarded as a kind of pilot scheme to establish a capital account by the Commission, but only on a very limited scale.
We need, not only in the Economic Community but in all the Western industrialised democracies, the recycling of funds from the OPEC countries on a much larger scale than we are seeing at present; and the recycling that is taking effect should be carried out much better. Central bankers and the institutions pride themselves on the way in which they have carried out recycling since 1974, but it seems to me that too much of this money has been brought back into short-term assets, or for the purchase of existing assets which forces up prices in an inflationary way but does not contribute to the creation of wealth.
I should welcome a deliberate attempt at Community level to bring back our own savings from the OPEC countries so that they could be put into projects which would add to our own wealth as a Community.
We ought to use the capital account to redress the balance of contributions and real needs over the long term. I accept that the annual budget is bound to contain anomalies. However, especially through regional policy, many of the anomalies in the annual budget to which right hon. and hon. Members rightly object could be put right over the course of time.
We should use recycling consciously to provide finance for regional policy and also to back specific projects which at present are hanging fire. I have in mind, for example, the Channel link and energy substitution projects. I should like to mention, in particular, the Severn barrage, because I also have interests in South Wales. The economy of South Wales and the West of England would be transformed if the Severn barrage scheme were taken up and financed as a Community project.
There are many other industrial projects that need support, including the total reconstruction of our car industry, which the Japanese have shown is long overdue. That is another of the projects that I should like to see taken on by the Community.

Mr. Teddy Taylor: rose—

Mr. Dykes: rose—

Sir Brandon Rhys Williams: It was not my intention to speak for very long. I am delighted to have attracted so much attention, but I hope that my hon. Friends will

forgive me if I do not give way to them. They will undoubtedly have an opportunity to catch the eye of the occupant of the Chair.
There are two questions that we need to ask about a large expansion of the Ortoli facility or of the activities of the European Investment Bank. The first is how to service the debt. We have to recognise that the OPEC countries are wise to the fact that the paper currencies of the West are depreciating so fast that they actually are losing money by participating in investments in the West and do not preserve its real value.
I have not much use for its contraptions—the paper currencies—twisted toogether into new-fangled units such as the SDR or the ECU. They do not seem to add very much to the strength of the individual paper currencies that are twisted into them. I doubt whether large financial operations could be carried out now or at any time in the future on the basis of the SDR or the ECU; but we need to explore with the OPEC countries the type of long-term guarantee that they would recognise as being suitable to preserve their assets.
The Severn barrage, for instance, might be financed by giving guarantees expressed in terms of kilowatt-hours. The Channel link might be guaranteed on the basis of the cost of a container-mile. Individual industrial projects could be financed on the basis of value added, rather than by making commitments in paper currencies in which, increasingly, international investors have no trust.
The second question is how to keep the capital and current accounts separate. We have to learn to do that if we are to make a success of Community finance and not allow it to deteriorate into the kind of muddle that I am sorry to say the British Government's finances are in at present. Whitehall might learn a lesson by listening to the way in which, for instance, German officials seek to separate the current account and the capital account. We are trying to put capital projects on to our small annual budget, and that is a mistake. But we should not fall into the other mistake of using the capital account to subsidise current spending.
Those are the thoughts that I wanted to put to the House, and I am glad to have had the opportunity to do so. We must recognise that the creation of the European Community is a long-term project, which can succeed only on the basis of adequate long-term finance.

Mr. Donald Anderson: We were to face a restructuring of the Community budget in any event because of the ever-nearing approach to the VAT ceiling. But it is clear that the end of May agreement reached between the Government and our partners has only accelerated that necessary restructuring. We had been saying for some time that an "unacceptable position" had arisen, and that was recognised at least in part by our partners in May 1980. Now it is clear that the Germans also are using the same argument, that an "unacceptable position" has arisen for them as well in the proportion of the EEC resources that they are contributing.
The question must arise whether, and to what extent, we and the Federal Germans now have a common interest in exercising a much greater discipline over the budget, and the response will depend in part on coalition politics in Germany and a series of other factors that we shall face.
Following the agreement of May last year, it was clear that there was a need to control the proportion of the total


budget going on the CAP and, if possible, to reduce it; ideally to find new areas of expenditure and to consider possible increases in resources. The permanent mechanism for solving the United Kingdom budgetary problem is necessary in any event, because of the pattern of our trade and because of the weight of agriculture in our economy.
The Commission was charged with the task of finding such a permanent solution. However, it is recognised on both sides of the House that the attempt thus far by the Commission has been too timid. It does not fill in the details. Even what the Commission proposes is only temporary. It is angled largely at the United Kingdom, when it is clear that the problem is more extensive than that of the United Kingdom and will extend to Germany and possibly to other countries.
The Government must make clear to the Commission the total inadequacy of the Commission's attempt to answer the mandate that it was given following the temporary budgetary arrangement for the United Kingdom.
To what extent has the Commission risen generally to the problem of restructuring the budget? We know that although there is an increase in total there will be less of an increase for agriculture and more for regional and social funds, which may marginally help us. Of course the base lines are so much greater for agriculture in any event. There has not been a radical restructuring, but perhaps that is impossible given the present configuration of political forces within the EEC.
What has happened is that there has been a turn of the wheel in the right direction—insufficient in itself either to justify the doubters, who say that the EEC is incapable of reformation, being the cornerstone of the EEC achievement, or to cheer the optimists, who say that because of the possible new London-Bonn axis the way is clear for a change in the EEC budget more on the model of what would accord with our own United Kingdom interests.
As the Opposition amendment underlines, the CAP remains in excess of 60 per cent. of the total budget. The 1 per cent. straightjacket remains on "own resources" so that, because of the compulsory expenditure of the CAP, and with the addition of largely agricultural economies such as those of Spain, Portugal and Greece, a lower proportion of the total EEC budget will be available for the sort of provision that Britain needs, especially for regional and social funds.
The CAP itself may not be profoundly changed during the next few years. Nevertheless, it is probable that by 1983–84 the EEC will be substantially different from what it is today. That will be, in part, because of enlargement and the shock to the system, including the budgetary structure, that will result from that enlargement. There may be new political forces at work. That can be exaggerated. While it is not clear yet what difference, if any, there will be in the French attitude to the Common Market in general, no one can doubt that President Mitterrand will fight in his corner for his farmers as vigorously as did his predecessor.
During the next two years it will be vital to watch how the EEC as a whole responds to the common crisis faced by all its members, especially in the area of unemployment. Figures have already been given for the projected increase in unemployment in all European countries. As the hon. Member for Mid-Sussex (Mr.

Renton) said, the play may be good and the actors may be ready to congratulate themselves, but the audience may be profoundly dissatisfied with the performance. That is the most worrying feature about the future of the EEC.
Increasingly, the concerns of the peoples of the Community are about jobs and the living conditions around them, whereas the concern of the EEC itself appears basically orientated towards agriculture—something that is not at the centre of the concerns of the people. We have just seen the recent survey on responses to the EEC, which has shown that the poorest areas in the United Kingdom are those least in favour of our continued accession. That is hardly surprising.

Mr. Myles: Will the hon. Gentleman concede that a stable supply of food is the main aim of any Government and any society, especially for the poorer areas?

Mr. Anderson: Of course that is a major concern of any Government. If it were clear that the sources of supply of food in the world were decreasing, the stability and security offered by the EEC would become that much more important. I hope that the hon. Gentleman will agree that more and more at the centre of the political stage will be a concern about unemployment and regional development, although there are links with what he said. If the EEC does not address itself to those problems, and with the current constraint in the budget it can hardly do so, it will be seen by more and more people as irrelevant to their needs. That is the real challenge facing the EEC, and the question is whether it can face it.
Apart from the question of popular acceptance, whatever sums come to Britain and whatever notices are put up saying "Gift of the EEC", the current position of the Government is not to make the expenditure additional but, rather, to make it part of the Government's general assault on public expenditure. Britain was on its own at the Luxembourg summit a month or two ago when considering how to respond to the employment crisis and the job creation proposals. All the commentators suggested that in response to monetarist policy there was a congruence of interest and approach by Chancellor Schmidt and the Prime Minister. However, on general job creation measures Britain was on its own. That hardly bodes well for our response to the challenge. If the EEC turns its back on the major concern of our people, it will deserve to fail.
What should be the British response to the present EEC position? I know that at its last conference the Labour Party pledged to withdraw from the EEC. In my view, it would be wholly premature to suggest that. Many of the arguments are made on assumptions that may or may not be valid by 1983–84. We cannot, as my right hon. Friend the Member for Battersea, North (Mr. Jay) regularly seeks to do, put back the clock to 1970 and put Humpty Dumpty together again. The world has changed substantially during the past decade.
The questions remain: can we hope to retain our share of exports to the EEC—43 per cent. or 45 per cent., including the oil element—if we withdraw? Can we be confident that in the tight competitive position that we have in the world we can find alternative markets elsewhere for any markets that we may lose within the EEC? Because of possible protectionism within the EEC, Japan and other new suppliers would fight us hard for any markets outside the EEC. Are we really confident that we


can have a "quickie" divorce, or will it be a more messy affair, with retaliation from our erstwhile partners? Can we be sure that we will retain our attractiveness for inward investment? We would not have a chance of the Nissan investment were we not a member of the EEC. I come from South Wales—a part of the world that has attracted one-third of the total of Japanese investment in the United Kingdom. Those investments would not be there were it not for the wider market offered by the EEC.
Before we reach a final conclusion about membership, I should like an area-by-area and industry-by-industry survey of the job impact of any such withdrawal. Can we hold our own with the weight of a single economy with a population slightly over 50 million in international trade negotiations? What would be our voice at Ottawa today if we were a single market with fewer than 60 million people?
I hope that we shall make our judgments on facts and not on emotion. I fear that by the time we come to the next election the EEC may have changed, and yet we shall have drifted into an anti-EEC stance, which will be shown by a commitment to withdraw on the part of the Labour Party. The possible continued dislike of the EEC within Britain may, by the time of the next election, force the Conservative Party to adopt a "me, too" attitude.
In my view the prudent course is to wait and see. Will the EEC succeed or will it have a sort of middle-age burn-out? It will have such a burn-out if it does not address itself to the concerns of our people. Given the new political and economic configuration, there is no better opportunity to seek reform and to work for change. We must work for a change that will link our contribution more closely to our proportionate GDP within the EEC. If there is no will to succeed on the part of our partners, and if the proper interests of Britain are ignored by our partners, we cannot remain a member of the club. It would be premature to reach such a conclusion now, and the prudent course remains to work for change.

Mr. Maurice Macmillan: I have no doubt that the budget and the common agricultural policy should be considerably reformed, as my hon. Friend the Member for Kensington (Sir B. Rhys Williams) explained so well. In the reforms that it proposes the Opposition amendment seeks to throw out the baby with the bath water. Indeed, the official Opposition and some Opposition Members want to kill the baby. They made a fine effort to abort it and they are now making a strong effort to destroy it. In common with other Opposition Members, I think that they are wrong to take that course.
Important though the budget operations are, they are small when set against the totality of what membership of the Community means and can mean in future for the benefit of Britain and its people. By 1980 the general budget was about 0·8 per cent. of the Community's GDP and about 1·7 per cent. of the combined member Government's expenditure. In 1980 agricultural spending represented 0·47 per cent. of the Community's GDP and between 1·1 per cent. and 1·4 per cent. of total agricultural spending by member Governments within the Community. I agree with the hon. Member for Swansea, East (Mr. Anderson) that we must shift the balance from agriculture to manufacturing industry. However, I remind the House that the proportion of the Community's spending on agriculture, when expressed as a percentage

of its GDP, is roughly the same as in Japan and the United States of America. Possibly, therefore, the proportion is not as distorted as we have all been led to believe. The Japanese and the Americans spend about 1·5 per cent of their GDP on agriculture.
In public expenditure terms the United Kingdom's net contribution will be £530 million for 1981–82. That is in contradistinction to about £5,300 million that we are spending on industry, energy and trade and about £1,000 million on aid.
The right hon. Member for Battersea, North (Mr. Jay) has a gloomy view of our economy if he thinks that this contribution will remain an insuperable burden. He seems to take the view that Britain will be permanently the sick man of Europe and that we must ensure that we receive better treatment than any other European country because we are less well able to look after ourselves. Part of the right hon. Gentleman's cure was rather odd. It would expose the United Kingdom, for the sake of reducing unit labour costs by bringing down the retail price index, to unrestricted imports from more efficient manufacturing countries. I imagine that the right hon. Gentleman had in mind countries such as Japan.
The Community's gross domestic product is larger even than that of the United States. It has been suggested on occasions during these debates that we should benefit, like the Japanese, outside the Community. Alas, our GDP is not like that of the Japanese—$1·46 billion. If it were more like that we might be in an economic position to be independent like Japan. The GDP of the United States is about $2½ billion, but that of the EEC is $2·790 billion.
The EEC gives us a great opportunity. We have a surplus on visible trade with the Community of about £709 million. Our trade with the Community is growing faster than our trade with any other market. Even our miserable rate of economic growth has been marginally better since we joined. It is true that our competitiveness is terrible. Our competitors' wages costs increased by about 12 per cent. over the past two years while ours increased by about 40 per cent. It takes the Germans about twice as long as the Japanese to make a motor car. It takes the Americans about twice as long as the Germans and we take about twice as long as the Americans. Those are not the precise figures but they indicate that our productivity is appalling. However, we have done better in the Community than outside.
The much-vaunted idea of standing on our own feet outside the Community is not very impressive if we test it against one measure of performance—the percentage of imports covered by exports. In 1974 it was 47 per cent. for Japan; by 1980 it had sunk by nearly half, to 28 per cent. In 1974 it was 82 per cent. for North America; by 1980 it has sunk by about one-quarter, to 66 per cent. But for the EEC it was 84 per cent. in 1979 and in 1980, 86 per cent. On balance, the Community has been of great benefit to manufacturing industry. The figures that I have quoted relate solely to manufacturing industry.
We have shown our incompetence in the face of the Japanese and the Americans, and even, alas, the Spanish, the Portuguese and the Greeks. The proportion of the imports from those countries that we have covered in exports has decreased by about one-third in the past six years. Our incompentence in the face of other competing countries has been mitigated by the advantages of being a member of the Community. I have a nasty feeling that part of that mitigation is due to the fact that we provide


a fairly cheap place in which to invest for the Americans and the Japanese, and to use as a base for their penetration of Community markets. That investment would not be so enthusiastic if we did not provide such a base. If that were so, I fear that they would change from manufacturing to finishing off semi-manufactures in Britain as a means of increasing their output in the United Kingdom market.
We shall do better by addressing ourselves to how we can overcome not only the immediate problems of the budget but some of its longer-term workings. We must move towards an energy policy. We must have some method of helping developing countries with their energy requirements, including developments based on the French nuclear initiative.
We must do something with the rest of Europe and get the European Community to act as such in trying to get some of the Arab money into the developing world. It is essential to world recovery. What is wrong is that the massive savings represented by Arab wealth are not being invested in productive industry. The EEC could do much better by moving in that direction than any country could by itself—co-operating, of course, with Japan, Canada and the United States.
We need new methods of developing investment from the rich countries, both into Europe and into the developing world, including the Arab States themselves.
My hon. Friend the Member for Mid-Sussex (Mr. Renton) suggested that it would help if we joined the EMS, thereby getting a degree of economic stability. I am a little sceptical whether the EMS goes far enough. I do not believe that it is possible for world trade and world economic policies to develop successfully for very much longer when we have no measure of changing currencies in the world, apart from what my hon. Friend the Member for Kensington called matching paper with paper.
There are attractions in the EMS, but, as a distinguished French economist remarked, if we have a lot of apples, some of them good and some of them bad, and put them in the same basket, we tend to end with a basket of rotten apples. There are limitations that we should seek to overcome.
I should like to see the European Community making a great deal more effort to try to get a degree of standardisation in matters such as defence equipment. It is ludicrous that we cannot shoot each other's bullets out of each other's guns, and achieve a good deal more co-operation in the more expensive forms of defence research and development.
I have tried briefly to make a few suggestions about what the British Government could do to improve the Community in the longer term, as well as to alter the short-term budgets and common agricultural policy. Of course we must fight our corner as hard as we can, but there is a little more to it than that. I beg the Financial Secretary and the Government, when they are fighting our corner, to remember to fight also for more effort by the Community as a whole in the longer-term development and to look to the future for the peace as well as the prosperity of this country.

Mr. Russell Johnston: I should like to start by referring briefly to the official Opposition's amendment, which refers to the failure of the proposed budget
to achieve a broad balance between the United Kingdom's contributions and receipts".
The expression "broad balance", as the right hon. Member for Stepney and Poplar (Mr. Shore) reminded us, was coined by the Prime Minister in an uncharacteristically non-astringent moment. It turned out essentially to be a euphemism for the juste retour. It is, in my judgment, a definition of the Community budget that I find unacceptable. It runs completely contrary to the ideals of convergence of economic opportunity and social conditions which go to the very heart of what the founding fathers of the Community wished to work towards.
However imperfect the practice—and I am the first to admit that it has been imperfect—if we turn our back on the redistribution of wealth within the Community we turn our back on its fundamental ideal.

Mr. Marlow: Will the hon. Gentleman give way?

Mr. Johnston: I do not want to give way at this stage, because many hon. Members wish to speak. I prefer not to give way, although I should like to do so in order to bat down the hon. Gentleman.
If we turn our back on the principle of the distribution of wealth we turn our back on a fundamental ideal. If we say that every country must be in broad balance—which is what we are saying if we say that Britain should be in broad balance—that means that we can throw out of the window any attempt at common industrial, regional or social policies. We go back to the simple principle "We are out for ourselves and what we can get, and forget everybody else." If Britain is to be in broad balance for ever, so must Germany, France and all the existing members. So, indeed, must Greece—and soon Spain and Portugal. That means that all the proud words about supporting democracy through enlargement would be quickly seen as empty and windy verbiage, and no more than that.

Mr. Marlow: Will the hon. Gentleman give way?

Mr. Johnston: If the hon. Gentleman will be brief.

Mr. Marlow: I am grateful to the hon. Gentleman. He mentioned the redistribution of wealth. Will he agree with me that the great problem at the moment is that wealth is redistributed in the Community, but from the poor to the rich?

Mr. Johnston: To some extent I would agree with that, but the hon. Gentleman's solution, and the solution proposed by the Opposition amendment, is not really a solution; it is a suggestion that would only make things worse.
The Opposition amendment goes on to speak of
inadequate provisions for regional, industrial and social policies
and criticises the commitment of
over 60 per cent. of the Community's total expenditure to the support of the Common Agricultural Policy".
That is contradictory on two grounds. First, even if the balance is changed, very little money is released—certainly not enough to do very much—and it increases the number of people unemployed in agriculture. The hon. Member for Northampton, North (Mr. Marlow) may say


that the CAP in one sense is Europe's job creation scheme. Perhaps we need job creation schemes at this moment. Does it make sense to release a great many people from agriculture to join the dole queues of the cities? I do not think that it does.
Secondly, without a real increase in the budget—which under present methods would mean increasing the VAT ceiling, as Roy Jenkins suggested when he gave up the Presidency of the Commission—I do not think that anything significant can be done in this area. The Opposition's amendment represents a negative and aimless approach.
In the Opposition amendment I am surprised to see no mention whatever of the EMS, to which various Conservative Members have referred. I should have thought that the Opposition would want to make some reference to it, either negative or positive. The Liberal position—and, indeed, the Social Democratic position—is that we should like to see Britain joining the European monetary system. It was one of the main achievements of Roy Jenkins, whose performance in the Warrington by-election at least demonstrates that close association with the European Community is no disadvantage electorally, for no one has been more clearly and definitely linked with the European Community than Roy Jenkins.
I admit that these are not encouraging times for those of us who remain deeply committed to the European Community. None the less, the Commission's draft proposals represent a realistic first step in the necessary reshaping of the budget. As has been said by a number of speakers, even from within the straitjacket of an unwillingness of the majority member States to exceed the 1 per cent. VAT ceiling, it sketches some road ahead for the Community. My Liberal colleague, Gaston Thorn, has done his utmost.
There was reference to the United Kingdom financial mechanism. It is temporary, but it is something. A rejection of broad balance, by the way, does not in any way mean an acceptance of an unfair contribution arrangement. We see a CAP adjustment. We see proposals to concentrate the regional fund effectively.
In this regard I should like to ask two questions of the Financial Secretary. I should be obliged to him for his attention, because the tradition on these occasions is that very few answers are received to questions asked. The non-quota section is referred to on page 54 of the preliminary draft general budget, where it says that
The reason there have been no commitments from the non-quota section of the Fund … is that the Council did not approve the measures until 7 October 1980.
That was a two-year delay. Why was the implementation delayed, and what position did Her Majesty's Government take? Secondly, now that it is implemented, what is the arrangement? It is only 5 per cent. of the regional fund. It is a pittance. [Interruption.] It is far too small, as the hon. Member for Lancaster (Mrs. Kellett-Bowman) interjects. But how is it approved? It has to go through the Council of Permanent Representatives. Is that by unanimity or by majority? It is not entirely at the hand of the Commission.
It is bogus for the right hon. Member for Stepney and Poplar to complain about the small amounts of money available for regional and social development and be unprepared to pay a penny towards it. That makes no sense whatever. There is reference in the budget to the elimination of existing non-tariff trade barriers, which

should be welcomed. Finally, there is emphasis on research programmes for energy, environmental protection, nuclear safety, and so on. As I said, the Commission has done its best, but it is insufficient.
It was surprising that in a few desultory remarks the right hon. Member for Stepney and Poplar referred to the need to link VAT payments to GNP. That is an important suggestion, which is equally attractive for those who believe that there should be a link between payment and the ability to pay. However, essentially, the right hon. Gentleman does not believe in that. He would not give more to the central pool to help Greece, although I suspect that he would take anything that Germany would give him. That is the fundamental contradiction in the Opposition's position.
We must look carefully at the new criteria for paying, but we should do so on the basis of an acceptance of some increase in the Budget. I once thought that the Labour Party believed in redistribution and not in national advantage. I once thought that it also believed in trying to develop with other democratic countries co-operation in tackling common problems. However, if the speech of its spokesman, the right hon. Member for Stepney and Poplar, is the basis of its approach, it no longer believes in those things. He made an arid, negative and spiritless speech, without a positive word in it.
The arguments for entry into the Common Market that were advanced in 1973 and adduced again in 1975 are as strong now as they ever were. Alone we shall not overcome our economic problems or unemployment problems—to say nothing of the political potential of membership. The right hon. Member for Stepney and Poplar rather uncharacteristically, because he is a polite man, refused to give way to me at one point. I was going to ask him about the word "tutelage", which he quoted in a resentful way from the Commission document. That is the sad thing about his approach and, to an extent, that of the Financial Secretary—he does not accept that anyone can teach him anything. I think that the economic and social performance of this country since the war shows that we have a lot to learn.

Mr. Teddy Taylor: The hon. Member for Inverness (Mr. Johnston) has at least been consistent, but those of us who have listened to his speeches on the Common Market over the years have probably gained the impression that if Britain had 99·9 per cent. unemployement and mass starvation the hon. Gentleman would say that it would have been worse without the benefit of EEC membership.
I am sorry that the Financial Secretary is to reply to the debate. Those of us who are critical of the Common Market and want structural change regard him and his team as allies. If the Government had the same determination on EEC spending as they have on national spending—if the Financial Secretary approached the EEC budget as he approaches spending in the United Kingdom—we might have a healthier Community and certainly the money would be better spent.
Before making some general comments, I put three specific points to my right hon. Friend in view of his invitation for suggestions for the meeting later this week. First, is there any way in which the United Kingdom Chairman of the Council of Ministers can sort out some of the appalling waste that does more damage to the EEC's


image than anything else. I believe that he knows what I mean. The Government and the Council of Ministers have no control over the spending of the so-called European fund. There is a gentlemen's agreement whereby the Parliament does not ask about the Council of Ministers' spending, and vice versa. I am sure that if my right hon. Friend, with his long experience of Treasury matters, had the opportunity of getting stuck into the expenditure of this so-called Parliament there would be major changes.
Secondly, I should like to ask him about the information machine of the EEC and its various outfits. It was interesting to hear my hon. Friend the Member for Mid-Sussex (Mr. Renton) say that we should perhaps spend more time and money telling people what a grand institution the EEC is. Far too much money is spent in that way. It is designed not to promote information but simply to put across rather bogus propaganda.
How much money in the budget will go, for example, to that spendthrift propaganda organisation known as the European Movement? In its publications it says that it does not receive any public funds, but it was disclosed in a recent answer to Mr. Ken Lomas that the organisation and its associated bodies received in 1977, 1978 and 1979 a total of £25,659, £68,616 and £33,315 respectively from EEC sources. I was astonished to discover from the paper published just the other day, called "Supply Estimates"—which is the Financial Secretary's own document—that this year we are to give £30,000 of British money to the European Movement without any check on how it is spent. There is a little mark against the money to show that, unlike other grants, even the Treasury and the Comptroller and Auditor General will not check on how it is spent, and, if it is not spent, the organisation can keep it anyway.
In Southend on Saturday I visited Viking House. About £100,000 has been raised by voluntary donations to make it a day centre for the mentally handicapped. The building is complete, but it is standing empty because the county cannot find the necessary funds to staff it. It makes me sick to think that the Government can spend money on a scandalous propaganda machine, which is churning out an immense amount of literature, inviting all and sundry for free and expense-paid trips and spending on a shameful, lavish and extraordinary scale.
My third point concerns a matter raised by my hon. Friend the Member for Mid-Sussex, who asked why we did not spend more money telling people about the grand money that we are getting from the EEC for bridges and other extra things to help people. I tried to interrupt him. If there is to be propaganda it should be fair. It is a simple point, but every pound of money that we get to spend on such things as bridges and roads costs the British taxpayer £1·95. That fact was stated in a written answer that I had from the Financial Secretary a few weeks ago, when he told me that since we joined the EEC we have put into it £6,720 million and received in grants and subsidies £3,651 million. Those figures are up to 31 December 1980.

Mr. Lawson: If I remember rightly, my right hon. Friend asked me for figures from the very moment that we joined the Community, and that is what he is quoting. However, he will be aware that there was a substantial improvement in the ratio as a result of the 30 May agreement.

Mr. Taylor: I accept that the situation has undoubtedly improved because of the renegotiation and the 30 May 1980 agreement. The gap is not so broad. However, I believe that the Minister will accept that, since we joined, for every pound that we have received we have paid £1·95. Even this year, our net contribution will be £500 million.
My hon. Friend the Member for Kensington (Sir B. Rhys Williams) wants new bridges and tunnels, but we could have more in Wales, Scotland and England if we paid for them ourselves. It is rather like putting British pound notes in a washing machine. They shrink in the wash.
We should approach this budget in the same way as we would approach a British Budget. The important thing is to ask how will it affect jobs. Jobs are our biggest problem. In considering this budget and the associated documents, we should ask ourselves how the budget and all that goes with it will affect jobs in Britain. This is the kind of aspect that the Treasury should consider. All the peripheral evidence is there. There is the situation in countries which did not join the EEC. Small countries such as Austria and Norway, which had about 1 per cent. unemployment in 1973, now have 1½ per cent. or 2 per cent. unemployment. Supporters of the EEC will immediately say that that is different because they are small and we are big, but in 1973, too, they were small and we were big. The countries which did not take on the burdens and restrictions of EEC membership have performed remarkably well.
What about Britain? How will the budget affect jobs here? First, we shall have to pay a substantial net sum to the EEC. That money would otherwise be available to the Treasury to cut taxes or to provide jobs. The sum this year is about £500 million. I hope that the Financial Secretary will at least give a clear commitment that in the current renegotiations he will not accept any arrangement that is worse than the 30 May agreement. It is frightening to think of the effect on jobs in Britain of the £3,000 million that we have been paying into the EEC since we joined. Certainly, that must account for a large number of jobs.
The second damaging effect is the CAP. The Secretary of State for Industry said today that unemployment was terrible, and would continue to be so until Britain became more competitive and could produce cheaper goods, which people wanted in the world market. I suggest that a crucial factor in our total production costs is the cost of food. It is basic, for example, in the context of wage bargaining. It is a major factor in determining total costs. What is the difference here? Some would suggest, based on the written answer by the Minister of Agriculture to my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) some time ago, that the net difference is about £3,000 million per year. That is £5 per week per British family. Others say that that does not tell the whole story. We know, however, the taxes that we have to charge on food as a direct result of this budget and the CAP. In a written answer on Tuesday 14 April, the Minister of Agriculture himself informed me that we must charge import levy of 60p per pound on butter, 61.14p on cheese, 67p on beef and 27p on lamb. These extra taxes add to the cost of food for the British housewife and the British worker, thus contributing to higher costs. Surely the Financial Secretary accepts that the existence of the CAP adds to industrial costs in every way and thus helps to destroy jobs in Britain.
The third factor to be borne in mind is the effect of trade upon jobs. We all know—there is no hiding it—exactly what has happened. The Secretary of State for Trade stated


in an answer on 29 June that in the eight years before we joined the EEC we had a profit in trade and manufactures with the Common Market of £300 million per year. In the eight years since then there has been an average annual deficit of £1·3 billion. That is a massive change. I ask the Financial Secretary again what is the effect of that upon jobs. How many jobs have been lost in Britain as a direct consequence of that massive shift in manufacturing trade from a regular profit to a regular massive loss?

Mr. Dykes: Not true.

Mr. Taylor: My hon. Friend says that that is not true. That was the answer given by my right hon. Friend the Secretary of State for Trade on 29 June.

Mr. Dykes: My hon. Friend's argument today would be more appropriate coming from the Opposition. He is putting the classic arguments of the Labour Party approaching the proposal to withdraw from the EEC. Does my hon. Friend also wish to withdraw from the Community? Apart from changes in the CAP, the ending of the Community budget system as we know it could not be achieved without such withdrawal.

Mr. Taylor: My hon. Friend is trying to divert me. As I have said to him publicly and privately, I am a member of an organisation called the Conservative European Reform Movement, which has put forward four specific suggestions for trade change. If those four suggestions were fully accepted we should be very happy to remain in the EEC. One of our proposals is the abolition of the present CAP. As my hon. Friend knows, that is possible and, indeed, practicable within the Treaty of Rome, which merely calls for a common agriculture policy, not the one that we have. It is a habit of my hon. Friend, when we reach a sticky point which perhaps upsets him and some of his silly friends in the various organisations which lash out money on pamphlets, to attempt to divert the debate.
We should be talking about jobs. I have mentioned the effect of the CAP and of trade. Some may say that these effects result not from the Common Market but from the fact that British workers are no good and British industry is uncompetitive. If that is so, why has our trade with the rest of the world improved dramatically while our trade with Europe has gone wrong?
A fourth factor which affects jobs can be discovered in the budget. I refer to the money spent on the anti-dumping procedures. We are well aware that jobs are being destroyed daily because goods are being dumped in this country from Eastern Europe, the Far East and, indeed, all other parts of the world. In the past when this problem arose and textile and footwear firms were being forced to close we could take prompt action. Unfortunately, since the changeover to the EEC we can no longer do that. We can only refer the matter to Brussels, where it is dealt with by a slow, cumbersome and ineffective procedure. Those are not just my views; they are the views of the CBI and the European employers' organisations which have made representations about this.
The fifth factor affecting jobs is the freedom of movement of people. In considering the amount spent on administration, one relevant factor is the number of people from the EEC who work in this country and the number of British workers in the EEC. The last figure that I was given in an answer by the Secretary of State for

Employment was that there were 410,000 EEC employees in Britain and 80,000 British employees in other parts of the EEC.
We must also consider the effect of Britain's attitude to these and other rules. The Italians have brought in import deposits. That is totally against EEC rules, but the system continues to exist and to disrupt trade. The whole picture shows that, by and large, we play by the rules while others do not.
I therefore hope that in replying to the debate the Financial Secretary will at least concede that there is a prima facie case for saying that the effect on jobs has been devastatingly bad. That is why we must go not just for tinkering reform but for the kind of reform that I suspect many people in the Treasury would like. That means doing away with the present CAP, which is covered in the budget to the extent of 60 per cent. That is perfectly possible within the Treaty of Rome, which calls only for a CAP, that is fair to consumer and user alike, with each country doing its own thing, supervised by the Commission. We must have equality of contributions and national control of anti-dumping procedures.
It is impossible to identify all the factors which have led to the tragic level of unemployment in the United Kingdom, but few who examine the evidence rationally would deny that entry into the EEC on the terms on which we joined has had a devastating effect on employment in this country. We must put that right. We shall achieve that not by the simple procedure of breaking off or getting out but by approaching reform in such a way that we demand major changes and not just cosmetic ones.

Mr. Denzil Davies: The hon. Member. for Southend, East (Mr. Taylor) was quite right to point out that membership of the EEC has cost thousands of jobs in Britain. Our massive deficit in manufacturing trade has closed factory after factory, not only in the development areas but throughout the country. I hope that in the autumn we shall be able to debate this issue so that we car, extract from the Government the number of the jobs that have been lost as a result of EEC membership.
Today's debate is a narrower one and covers the documents that are now before us—in the main, the draft Community budget for the calendar year 1982. When one reads these documents and the explanatory memorandum one is forced to the conclusion that they make a depressing start to the United Kingdom's Presidency of the Common Market over the next six months.
The documents show—and the explanatory memorandum sets it out—that the United Kingdom will be contributing almost one-quarter of the total gross revenues of the Common Market budget—a total payment of £2,700 million. In other words, 23 per cent. of gross payments will go from the United Kingdom to the EEC, and that despite the fact that our GNP per head of population is the fourth lowest in the Community. That is the clear point revealed by these documents.
The Financial Secretary will correctly point out that what matters at the end of the day is the net contribution when the gross payments have been balanced against the receipts. However, nowhere in the explanatory memorandum does it state what the net contribution will be. When pressed, the right hon. Gentleman muttered something about £500 million, but he does not know; neither does the Treasury. If the Treasury knew what the net contribution


would be it would have said so in the explanatory memorandum. However, nothing is said because the Government have no idea what the net contribution will be to the 1982 budget.
Indeed, based on these documents, I suggest that our net contribution could be about £1½ billion. The Minister shakes his head. In that case, he can say why he has not included a figure in the explanatory memorandum. I believe that it could even be higher than £1½ billion.
The Government cannot pray in aid the payments that have arisen as a result of the 30 May 1980 compromise agreement, because those payments relate to 1980 and 1981. They do not relate to 1982. There was no specific agreement about that year. All that we have is a vague statement by the Council of Foreign Ministers that if a permanent solution was not drawn up before 1 January 1982 the same kind of mechanism would apply.
Will the payments next year be £500 million or £1½ billion? In its latest document, which is not on the Table, the Commission sets forward certain mechanisms for changing the United Kingdom's budgetary position. But that document contains no figures. However, on the basis of the proposals it is possible to work out the United Kingdom's contribution in 1982 if all the countries agree to the proposals. That total would be about £850 million net, or £300 million more than the Financial Secretary hopes that we will have to pay in 1982.
This demonstrates that the Financial Secretary and the Government have no right to seek the House's endorsement of documents when they do not know how much British taxpayers' money will be paid across the exchanges into the EEC budget in the next calendar year. The right hon. Gentleman should take these documents away, and we should debate them again when he is able to give exact figures.
This shows how imprudent the Government were to accept the compromise of May 1980. Not only did they give away any chance of obtaining a fundamental reform of the CAP, not only did they betray the interests of British fishermen, not only did they give away the veto in the last agricultural price fixing; they lost for ever any chance of making a fundamental and radical reform in the Common Market budget.
Just as we were two years ago, we are again at the mercy of the other EEC countries. We are forced to go to them before the end of the year and beg them to give back some of our own money. The Government and the Financial Secretary have no idea how much money we will get back, nor have they any idea how much we will have to contribute. Will it be £500 million, £850 million or £1½ billion?
The preliminary draft budget for 1982 estimates that spending on the CAP may be about 60 per cent. of the total spending. I concede that that is a lower percentage than it has been for some time. However, the improvement is a superficial one because it is purely fortuitous and is not caused by any changes in the structure of the system. It is caused by factors which in the main are completely outsie the control of the Commission, the Council of Ministers and the whole Common Market mechanism.
As the Commission points out, the main reason for the reduction is the belief—it is only a belief, because this is an estimate—that the gap between world prices and EEC prices for the next 12 months or so will not be as large as

it has been, therefore making it less expensive to dispose of food surpluses on world markets. In addition, there appear to have been favourable currency fluctuations and green currency changes. But, as the Financial Secretary knows, these can go either way, and next year or the year after there could again be a vast increase in CAP expenditure.
On page 25 of volume 7/A, the Commission clearly states:
there is no way of predicting accurately the funds needed to meet the obligatons arising under the CAP".
Therein lies the fault of the system. There is no control over CAP expenditure. It is a totally open-ended commitment, and that is one of our basic objections to it.
Even if the Council of Agriculture Ministers were to freeze prices for a few years, there would still be no guarantee that expenditure would drop, because other factors could and would push up CAP expenditure. For example, world food prices could drop rapidly. To compensate for the lower prices, farmers would increase their productivity just as they have done in the past. A depression or a recession could reduce consumption. Even with a price freeze, there would be no guarantee at all because all those other factors might come together and prevent any lessening in CAP expenditure. Unless there is a fundamental change in the CAP—and that has been ruled out by the 30 May compromise—the CAP will always take an exorbitant amount of money from the budget and we in Britain will constantly be at a disadvantage.
I have referred briefly to the Commission's document. Because of the time, and as it is not on the Table, I shall not go into detail. That document makes some tentative suggestions about the CAP and the budget, and tentative and vague they are. I believe that there is general agreement in the House that they are quite unsatisfactory and that they do nothing to meet the problem.
There are rather woolly guidelines about the CAP, which the Commission calls "adjustments". Indeed, the Commission admits that the adjustments would have little effect on Britain's contribution. Therefore, the Commission's own proposals on the CAP, tepid as they are, would have no effect at all on Britain's budgetary contribution. The Commission goes on to suggest various ways in which our contribution could be reduced. But even on the best estimate those proposals would produce a net British contribution to the 1982 budget of £850 million—£300 million more than what the Financial Secretary hopes we will be able to get from the Council of Ministers.
I hope that the right hon. Gentleman will say again—he was fairly forthright in opening—that he condemns utterly the Commission's paper as totally inadequate to solve the problem. At least, however, the Commission has put forward some suggestions. We have heard nothing from the British Government. We heard nothing today from the Financial Secretary. We have heard nothing from the Foreign Office, which will apparently be negotiating these matters. The Foreign Secretary tours the world in search of a role. He travels to Moscow one day and to Riyadh the next. Yet nothing is heard about a fundamental problem relating to the British economy and the British taxpayer. There is complete and utter silence. It is clear that the Government do not have either the imagination or the courage to face the problem and are hoping that somehow, by 1 January 1982, the problem will go away.
The Chancellor of the Exchequer made a speech in Holland recently—this was mentioned by the Financial Secretary—but it contained no radical initiatives. It was very lukewarm and negative in tone in relation to the CAP and the Budget. There will be no permanent and fair solution to the problem of the budget unless it is based on a number of basic and fundamental changes.
The Opposition believe that it is no solution to agree to an increase in the VAT ceiling of 1 per cent. and then to use some of the extra money to construct another grandiose common policy under the control of the Commission. Common policies that have to be applied to the different conditions and economies of 10 European countries are bound to be inefficient and wasteful, and to lead to the same kind of absurdities as those seen in the common agricultural policy. If, as is obviously the case, there is need to spend more money to reduce unemployment, to help the inner cities and to promote regional development, what on earth is the sense of doing it by transferring more British taxpayers' money to the Commission in Brussels for the Commission to hand some of it back and tell us where and how to spend it? It is a fairly fundamental proposition that British taxpayers' money should be spent in Britain at the behest of the elected Government of this country.
Secondly, as the amendment makes clear, the United Kingdom's contribution to the budget should not exceed our receipts. There should be a broad balance. That seems to me a perfectly reasonable proposition. The French have been in this position almost every year since they have been a member of the Common Market. Our national income is well below the average for the Community as a whole. Why should we have to make any contribution, let alone a major contribution, to the budget? Why cannot contributions be based on countries' different gross domestic product? The Benelux countries and Denmark are substantially wealthier than Britain. They are net beneficiaries from the budget. If they merely balanced their contributions and receipts—we are not asking for more—those four countries, probably the richest in Europe, would release £1 billion to the budget. Why should that not happen? Why should those countries and others have substantial receipts from the budget?
We also believe that the CAP should be gradually dismantled and replaced with national assistance to agriculture that can cater for the different needs and farming structures of member States. I do not believe that the future of Western Europe will be put in jeopardy by the demise of the common agricultural policy. In the meantime, while the Financial Secretary is dismantling the CAP, I suggest that he should at least try to ensure, and try to get other members to agree, that expenditure on the common agricultural policy should be subject to the same budgetary rules and constraints on expenditure as expenditure on the regional fund, the social fund and other expenditure.
It makes no sense at all. This so-called budget deals with only 30 per cent. of expenditure. The Financial Secretary, poor fellow, will be attending long meetings in Brussels almost up to Christmas but will nevertheless be dealing with only 30 per cent. of expenditure. The rest is completely out of control. One of the most fundamental reforms that should be made is that all expenditure in the budget should be controlled in the same way as the expenditure contained in that 30 per cent.
The Opposition are not hopeful that the Government, despite holding the Presidency, and with all the ballyhoo that follows, will be able to obtain even one of these fundamental changes. If the Government fail I believe: that Britain and the British economy will continue to suffer from a system that is totally unfair and unjust to us. By passing the Opposition amendment tonight this House of Commons will at least make clear not only to the Government but to other member States that we reject the enormous contribution demanded by the draft 1982 budget and that, even if the Government lack the courage and imagination to act, the House of Commons is at least prepared to say "Enough is enough."

Mr. Lawson: The House has just listened to another tirade from the right hon. Member for Llanelli (Mr. Davies), who had the impertinence to try to instruct the Government on how they should negotiate a reduction in the net contribution. The right hon. Gentleman asked why the Government had not made a statement. He is in no position to tell us how to negotiate the matter. The Labour Government had the opportunity to negotiate, and achieved absolutely nothing. They achieved no reduction in the net contribution to the Community budget. I shall take no notice of the right hon. Gentleman's advice, helpful though it may have been intended to be, on how to set about achieving an improvement on the 30 May agreement and its extension into a permanent solution.
The right hon. Gentleman got rather muddled about the net contribution in 1982. The net contribution that Britain has to pay in 1982 is related to the events of 1981. The matter is one year in arrears, yet the right hon. Gentleman was not at all clear on whether he was talking about that or about 1983 and the payments of 1982.

Mr. Denzil Davies: I wish to make it clear, as I did in my initial question, that I was referring to net payments in respect of the 1982 Community budget. The right hon. Gentleman mentioned £2,700 million as the gross payment. What is the net payment in respect of that gross payment?

Mr. Lawson: The right hon. Gentleman is now talking about the net contribution in 1983 in respect of the 1982 budget. It is impossible to say at this stage. It depends on the restructuring negotiations that have just begun. This has been made clear. The undertaking that we got in the 30 May agreement was that the refunds on the existing system would run for two years—in 1981 in respect of 1980, and in 1982 in respect of 1981. I thought that it was that that the right hon. Gentleman was discussing earlier.
As for 1983, in respect of 1982, that should be superseded by the agreement on restructuring the budget, which is in the process that we are now going through. If it is not, there will be a further extension of the 30 May agreement. That is clear. It is impossible to say what will be the precise sum. Nor is it a factor in the Government's accounts in 1982. The right. hon. Gentleman is talking about the Government's accounts in 1983. There are many aspects of the Government's accounts in 1983 that cannot be stated with precision at present.

Mr. Jay: In that case, will the Financial Secretary now tell us precisely what will be the net contribution in 1982?

Mr. Lawson: It is possible to get closer to that, but not to be precise. We expect the refunds that we get in 1982 to be about the same as the refunds that we get this year.
The net contribution is likely to be slightly in excess of the net contribution this year. It is impossible to say what will turn out to be the final figure. That depends on the 1982 Community budget, which has not yet been agreed. Indeed, the budget will not be agreed until the end of the year. The first round of discussions on the 1982 budget begin this week. That is why we are having this debate.
I should like to ask the right hon. Gentleman a question. He talked about a great saving and argued that agriculture should be supported nationally. How much would a Labour Government be prepared to pay on agricultural support nationally? That is an important question. The only way that Labour Members could get savings of the sort that they have spoken about would be by ceasing to assist the United Kingdom farmer.

Mr. Marlow: rose—

Mr. Lawson: I do not have time to give way.
It is clear that until the right hon. Member for Llanelli and his party are prepared to say what form and what scale of national support they are prepared to give the farmer—perhaps nothing at all—

Mr. Ron Leighton: rose—

Mr. Lawson: I shall not give way. I do not have very much time.
Unless Labour Members are prepared to say what form and what scale of national support they would give the farmer, it is impossible to believe their sincerity. It is equally impossible to believe their arithmetic. The offset against any saving that they are suggesting can be made would have to be made good by national aids to the farmer.
I have become tired of the right hon. Gentleman's gloom-mongering predictions, which are regularly falsified. We had a debate in the House on this subject a year ago. On 2 July 1980 the right hon. Gentleman said:
I submit that if there is no fisheries policy by the end of the year"—
he was refering to the end of 1980—
there will be no payment under the budget."—[Official Report, 2 July 1980; Vol. 987, c. 1678.]
The right hon. Gentleman assured the House that not a penny would be paid under the budget unless a fisheries agreement was concluded by the end of the year. We do not have a fisheries agreement. We are still fighting for British fishermen. Yet we have received every penny of the refunds that were due to us under the 30 May agreement. So the right hon. Gentleman has been proved to be wrong in that prediction, as he has been proved to be wrong in almost every prediction that he has made on economic or Community budget matters.
I shall try to deal briefly with some of the points that have been raised. I am sure that right hon. and hon. Members will forgive me if, in the little time remaining to me, I cannot deal with all of them.
My hon. Friend the Member for Southend, East (Mr. Taylor) raised a number of matters. I do not accept his statement that there has been a loss of jobs in the United Kingdom as a result of membership of the Community.
My hon. Friend also asked a question about the moneys paid for the European Parliament. Last year I expressed concern in the Council of Ministers at the amount that the European Parliament was, through, as it were, the gentlemen's agreement, voting itself. However, I am glad

to be able to tell my hon. Friend that in this year's budget the increase for the European Parliament is only 5 per cent. in money terms, which is a reduction in real terms. That may well suggest that my concern last year that the sum was a bit too high was well founded. Nevertheless, my hon. Friend will at least be reassured to know that.
My hon. Friend the Member for Mid-Sussex (Mr. Renton) raised a number of matters, including that of the European monetary system. This is constantly under review. While it is true that currency stability is something that many business men would like, the great instability that we have seen, as my hon. Friend said, is between the European currencies and the United States dollar. It is not between sterling and the European currencies. Even if we were to be a full member of the European monetary system and part of the exchange rate mechanism we could not do anything about that major instability between the dollar and other currencies.
My right hon. Friend the Member for Farnham (Mr. Macmillan) rightly pointed out that our problems are not wholly due to the EEC. He was right to remind the House that it is always easy to use the Community as a scapegoat. We have problems, but that is not where the difficulties lie. My right hon. Friend suggested that we should take a wider look, rather than just look at narrow budgetary issues. We take a wider look, and we look at the wider issues and the longer issues—peace as well as prosperity. But we must still concern ourselves with the budget. It is important that we do that. It is my humble task to play a part in that, and it is a part that I intend to carry out.
This matter links up very much with what my hon. Friend the Member for Mid-Sussex said. He was right to say that British public opinion is not altogether happy about membership of the Community. [Interruption.] Opposition Members may laugh, but when this matter was put to the people of Britain in a referendum in 1975 there was a very clear answer, and I suspect that the answer would be the same today. I am sure that the more progress that we can make on the European budget question the less discontented that British public will be with the effects of membership of the Common Market. It is very difficult to justify the fact that we, with a standard of living below the Community average, are the second biggest contributor to the budget.
Finally, the hon. Member for Swansea, East (Mr. Anderson) made a very sensible and balanced speech, as he always does. He said that he was worried that the Labour Party was drifting into a committed anti-EEC stance. I regret to have to inform him— I know that other Opposition Members feel the same way—that it is too late. That drift has already reached the point at which, if one were to read between the lines of fine print in what the right hon. Member for Stepney and Poplar (Mr. Shore) said, it is apparent that the Labour Party is firmly committed to withdrawal from the Community. However, for some reason or other the Labour Party does not have the guts to come out into the open about it.
Does the right hon. Member for Stepney and Poplar deny that there is within the Labour Party an EEC study group—of which I believe the right hon. Member for Llanelli is a member—which is on the point of finalising—if it has not done so already—a lengthy document of 20 or more pages, which I trust will be published very soon, committing the Opposition to withdrawal from the European Community? When will it be published? Perhaps the House can be told. We shall be


interested to know. Instead of the shadow boxing that we have had across the Dispatch Box tonight about how to reform this and that, and how to negotiate this and that, and the ridiculous amendment to the motion, why do not Labour Members come out in their true colours? I think that the House would then be able to reach a clear decision on this matter. The country will reach a clear decision on it when the time comes.
In the meantime, I invite the House to throw out the Opposition amendment.

Mr. Tony Marlow: We are debating the budget for the European Community. Two years' budget could be as much as £2,000 million. This is a very important matter. It is the bill that we pay for our membership of the Community.
No doubt my right hon. Friend the Leader of the House will one day set aside time for a debate on the benefits of our membership of the Community. He need not worry about setting aside too much time. For 1981 the die is cast. For 1982 the budget is still a matter for negotiation and discussion. I am sure that my right hon. Friend the Prime Minister will be as adamant in British interests as she always is. She has said already that she will be requiring fundamental reform in the budget and the common agricultural policy.
We must look at the cost that we are paying now, despite my right hon. Friend's magnificent efforts last year. This year membership of the Community will cost us, across the exchanges, £530 million. My hon. Friend the Member for Mid-Sussex (Mr. Renton) suggested that we should let people know the facts about the Community, and that wherever the Community puts money into this country for investment we should, at the site of the factory, put up a notice saying that we have had so much money from the Community.
This £530 million costs the average wage earner 80p every week. I should like to make a simple suggestion, namely, that every week every wage packet should have a little item on it saying that the Community has cost the person involved 80p. We should let people know the facts.
We know that the European Assembly will cost us £120 million. That amounts to £½ million for each of its members. We also know that £7,500 million has been set aside in the form of guarantees for farmers. Labour Members are not keen on Trident, but in one year that is one and half times Trident's eventual all-time cost. We do not know that agricultural guarantees will cost 60 per cent. It is said that the figure will be 60 per cent., but if world agricultural prices drop, the figure will climb way above that.
I said that the budget was the bill that we paid for our membership of the Community. However, it is only part of that bill. Indeed, it is the smalles part of it. My hon. Friend the Member for Southend, East (Mr. Taylor) said that he had received an answer from my right hon. Friend the Minister of Agriculture, Fisheries and Food. The cost of the CAP to the British consumer is £3,000 million in any year. My right hon. Friend the Financial Secretary said that we would be bound to pay our own agricultural support. We know that we would be bound to do so and calculations have been done. That would cost us £1,500 million. Therefore every family in that land faces an

additional bill of £2·50 per week over and above the cost of agricultural support, which, naturally, we all feel that we should sustain.
If my right hon. Friend the Financial Secretary should feel that the figure that I have cited is inaccurate I should be happy for him to intervene. Those are the calculations that have been produced. The Government have been asked for other calculations, but they have not been produced. It is important to bear in mind that there is a major disadvantage in belonging to the EEC. We are the only major food-importing country in the EEC. We import one-third of our foodstuffs from temperate climes. If we have a high-price regime and pay high prices to our farmers in need of agricultural support, that is fine. However, we are paying high prices to Danish, Dutch, German and French farmers. That is every bit as much a burden to our consumers as the budget is a burden to our taxpayers. I hope that my right hon. Friend is listening. When he goes into the budget negotiations, will he calculate the cost of the CAP to the consumer over and above the budget cost? That is a real cost and it is greater than that of the budget. That must go into the calculations.
I have already spoken about the cost of the CAP and that of the budget. Sadly, there is an even more savage cost, namely, the cost to jobs. Right hon. and learned Members have pointed out the savage effect that: our present situation in the Community has on jobs. In the three years leading up to the recession our balance of trade deficit in manufactures increased to such an extent that it was equivalent to 250,000 jobs.
Those hon. Members who have engineering companies in their constituencies will know of the way in which they have been undercut and put out of business. Jobs have been lost and people have been thrown on the dole queues because of our membership of the Community and the terms of our membership. We complain about the unfair practices of the Japanese and the way in which they are smashing our industry. Does not the House realise that our balance of payments deficit in manufactures with the Federal Republic of Germany is three times that of our deficit with Japan?
In this recession, one of the most important things that can help towards overcoming the problem of unemployment is our trade policy. However, one of the penalties of membership of the Community is that we have surrendered our trade policy, lock stock and barrel to Brussels. My hon. Friend the Minister for Trade is sitting on the Front Bench. He does a magnificent job, but there is little that he can do, because all his powers have been transferred and taken away from him.
There is a world recession and everyone is suffering from unemployment. However, we have a petro-currency that makes us less competitive than other countries. Our problems in the recession are worse than the problems of others. They are not of the same nature as those of other European countries. We have problems outside, which they cannot comprehend. We also have problems inside, because European countries have free access to our markets at a time when our currency is uncompetitive.
Still, we have surrendered our trading policy to the well-manicured hands of the Brussels bureaucrats. What have they done? What about Japan and the laser beam that has fastened on to some of our industries? The Federal Republic of Germany is in favour of free trade. It is not concerned about Japan. France has ways of overcoming such things. The Italians overcame the problem before it


started. What about us? Who is interested in little Britain or in the United Kingdom? Those countries are supposed to be fighting for us, but they are not concerned about us. We are only part of their problem.
Hon. Members should bear in mind that 50 per cent. of one type of electrical appliance—food mixers—have been imported from Eastern Europe at one-third of the United Kingdom price. They are being dumped. What happens when we fight dumping in Eastern Europe? We have to take the problem to the Community. All the other countries get together, including West Germany. The West Germans and the East Germans are the same people. The West Germans do not want to stop the East Germans. They are not concerned if East German manufactures come into the United Kingdom and destroy our industries. Therefore, they delay and delay. Other electrical appliances come into Britain. For more than a year complaints have been made on dumping but there has been no resolution of the problem. Industries are being destroyed. Brussels fiddles while Britain burns.
Norman Sommerfeld, president of the British Footwear Manufacturers Federation states:
I recognise that the Government is itself subject to all sorts of practical and institutional restraints—not least our membership of the Community . . We were sold membership of the Community partly because of the great negotiating weight that it would bring to bear on our behalf. But instead, too often, it has appeared divided, irresolute and slow to take necessary action in its members' interests.
The Community has been particularly slow to take action in our interests. It does not seem to care.
Man cannot live by bread alone. We all need a sense of direction and a certain spiritual uplift. The great European adventure—the idea of European co-operation and of Europe being stronger as a whole than its individual parts—has much to commend it. We should all like to go along with that. But how can we, when the Community's very instruments are so unfair?
Would the French put up—as we have done—with robbery from the Community budget? Would they allow their industry to be devastated by inadequate trading policies that do not suit their national needs? Would the French have allowed such a massive extension to their dole queues while other European countries railroad in goods at prices with which they could not compete?
How much longer must the United Kingdom be the paymaster of Brussels, the whipping boy of the Community and a lamp-post for every French poodle and German dachshund? We have all the cards in our hands. We have the market for their agricultural surpluses. We have the market for their manufacturing surpluses. We have got the North Sea oil that they all need. We have the status in the world to work together politically with other European countries. We must demand reforms and equity, and in pursuing this budget we have the instrument with which to do so.

Question put, That the amendment be made:

The House divided: Ayes 219, Noes 301.

Division No. 281]
[10.00 pm


AYES


Adley, Robert
Cadbury, Jocelyn


Aitken, Jonathan
Carlisle, John (Luton West)


Amery, Rt Hon Julian
Carlisle, Kenneth (Lincoln)


Ancram, Michael
Carlisle, Rt Hon M. (R'c'n )


Arnold, Tom
Chalker, Mrs. Lynda


Aspinwall, Jack
Chapman, Sydney


Atkins, Robert(Preston N)
Churchill, W. S.


Atkinson, David (B'm'th,E)
Clark, Hon A. (Plym'th, S'n)


Baker, Kenneth(St.M'bone)
Clark, Sir W. (Croydon S)


Baker, Nicholas (N Dorset)
Clarke, Kenneth (Rushcliffe)


Banks, Robert
Clegg, Sir Walter


Beaumont-Dark, Anthony
Cockeram, Eric


Bendall, Vivian
Colvin, Michael


Bennett, Sir Frederic (T'bay)
Cope, John


Benyon, Thomas (A'don)
Corrie, John


Benyon, W. (Buckingham)
Costain, Sir Albert


Best, Keith
Cranborne, Viscount


Bevan, David Gilroy
Critchley, Julian


Biffen, Rt Hon John
Crouch, David


Biggs-Davison, John
Dean, Paul (North Somerset)


Blackburn, John
Dickens, Geoffrey


Blaker, Peter
Douglas-Hamilton, Lord J.


Body, Richard
du Cann, Rt Hon Edward


Bonsor, Sir Nicholas
Dunn, Robert (Dartford)


Boscawen, Hon Robert
Durant, Tony


Bottomley, Peter (W'wich W)
Eden, Rt Hon Sir John


Boyson, Dr Rhodes
Eggar, Tim


Braine, Sir Bernard
Eyre, Reginald


Bright, Graham
Fairgrieve, Russell


Brinton, Tim
Faith, Mrs Sheila


Brittan, Leon
Farr, John


Brooke, Hon Peter
Fell, Anthony


Brotherton, Michael
Fenner, Mrs Peggy


Brown, Michael(Brigg &amp; Sc'n)
Finsberg, Geoffrey


Browne, John (Winchester)
Fisher, Sir Nigel


Bruce-Gardyne, John
Fletcher, A. (Ed'nb'gh N)


Bryan, Sir Paul
Fletcher-Cooke, Sir Charles


Buck, Antony
Forman, Nigel


Budgen, Nick
Fowler, Rt Hon Norman


Bulmer, Esmond
Fox, Marcus


Burden, Sir Frederick
Fraser, Rt Hon Sir Hugh


Butcher, John
Fraser, Peter (South Angus)





Galbraith, Hon T. G. D.
Mates, Michael


Gardiner, George (Reigate)
Mather, Carol


Gardner, Edward (S Fylde)
Maude, Rt Hon Sir Angus


Garel-Jones, Tristan
Mawby, Ray


Gilmour, Rt Hon Sir Ian
Mawhinney, Dr Brian


Glyn, Dr Alan
Maxwell-Hyslop, Robin


Goodhart, Philip
Mayhew, Patrick


Goodhew, Victor
Mellor, David


Goodlad, Alastair
Meyer, Sir Anthony


Gorst, John
Miller, Hal (B'grove)


Gow, Ian
Mills, Iain (Meriden)


Gower, Sir Raymond
Mills, Peter (West Devon)


Grant, Anthony (Harrow C)
Moate, Roger


Gray, Hamish
Monro, Hector


Griffiths, E.(B'y St. Edm'ds)
Montgomery, Fergus


Griffiths, Peter (Portsm'th N)
Moore, John


Grist, Ian
Morris, M. (N'hampton S)


Grylls, Michael
Morrison, Hon C. (Devizes)


Gummer, John Selwyn
Morrison, Hon P. (Chester)


Hamilton, Hon A.
Mudd, David


Hamilton, Michael (Salisbury)
Murphy, Christopher


Hampson, Dr Keith
Myles, David


Hannam, John
Neale, Gerrard


Haselhurst, Alan
Needham, Richard


Havers, Rt Hon Sir Michael
Neubert, Michael


Hawkins, Paul
Newton, Tony


Hawksley, Warren
Nott, Rt Hon John


Hayhoe, Barney
Onslow, Cranley


Heath, Rt Hon Edward
Oppenheim, Rt Hon Mrs S.


Heddle, John
Page, Rt Hon Sir G. (Crosby)


Henderson, Barry
Page, Richard (SW Herts)


Hicks, Robert
Parkinson, Cecil


Higgins, Rt Hon Terence L.
Parris, Matthew


Holland, Philip (Carlton)
Patten, Christopher (Bath)


Hordern, Peter
Patten, John (Oxford)


Howell, Rt Hon D. (G'ldf'd)
Pawsey, James


Howell, Ralph (N Norfolk)
Percival, Sir Ian


Hunt, David (Wirral)
Pink, R. Bonner


Hunt, John (Ravensbourne)
Pollock, Alexander


Hurd, Hon Douglas
Prentice, Rt Hon Reg


Jenkin, Rt Hon Patrick
Price, Sir David (Eastleigh)


Jessel, Toby
Prior, Rt Hon James


Johnson Smith, Geoffrey
Proctor, K. Harvey


Jopling, Rt Hon Michael
Pym, Rt Hon Francis


Joseph, Rt Hon Sir Keith
Rathbone, Tim


Kaberry, Sir Donald
Rees, Peter (Dover and Deal)


Kellett-Bowman, Mrs Elaine
Rees-Davies, W. R.


Kershaw, Anthony
Renton, Tim


Kimball, Marcus
Rhodes James, Robert


King, Rt Hon Tom
Rhys Williams, Sir Brandon


Knight, Mrs Jill
Ridley, Hon Nicholas


Knox, David
Ridsdale, Sir Julian


Lamont, Norman
Rifkind, Malcolm


Lang, Ian
Roberts, M. (Cardiff NW)


Langford-Holt, Sir John
Roberts, Wyn (Conway)


Latham, Michael
Rossi, Hugh


Lawrence, Ivan
Rost, Peter


Lawson, Rt Hon Nigel
Royle, Sir Anthony


Lee, John
Scott, Nicholas


Lennox-Boyd, Hon Mark
Shaw, Giles (Pudsey)


Lester, Jim (Beeston)
Shelton, William (Streatham)


Lewis, Kenneth (Rutland)
Shepherd, Cohn (Hereford)


Lloyd, Peter (Fareham)
Shepherd, Richard


Loveridge, John
Shersby, Michael


Luce, Richard
Silvester, Fred


Lyell, Nicholas
Skeet, T. H. H.


McCrindle, Robert
Speed, Keith


Macfarlane, Neil
Speller, Tony


MacGregor, John
Spence, John


MacKay, John (Argyll)
Spicer, Jim (West Dorset)


Macmillan, Rt Hon M.
Spicer, Michael (S Worcs)


McNair-Wilson, M. (N'bury)
Sproat, Iain


McNair-Wilson, P. (New F'st)
Squire, Robin


McQuarrie, Albert
Stainton, Keith


Madel, David
Stanbrook, Ivor


Major, John
Stanley, John


Marland, Paul
Steen, Anthony


Marlow, Tony
Stevens, Martin


Marshall, Michael (Arundel)
Stewart, Ian (Hitchin)


Marten, Neil (Banbury)
Stewart, A.(E Renfrewshire)






Stokes, John
Walker, B. (Perth)


Stradling Thomas, J.
Wall, Patrick


Tapsell, Peter
Walters, Dennis


Taylor, Teddy (S'end E)
Ward, John


Tebbit, Norman
Warren, Kenneth


Temple-Morris, Peter
Watson, John


Thomas, Rt Hon Peter
Wells, John (Maidstone)


Thompson, Donald
Wells, Bowen


Thorne, Neil (Ilford South)
Wheeler, John


Thornton, Malcolm
Whitelaw, Rt Hon William


Townend, John (Bridlington)
Whitney, Raymond


Townsend, Cyr I D, (B'heath)
Wiggin, Jerry


Trippier, David
Williams, D.(Montgomery)


Trotter, Neville
Wolfson, Mark


van Straubenzee, W. R.
Young, Sir George (Acton)


Vaughan, Dr Gerard
Younger, Rt Hon George


Viggers, Peter



Waddington, David
Tellers for the Ayes:


Wakeham, John
Mr. Spencer Le Marchant and


Waldegrave, Hon William
Mr. Anthony Berry.




NOES


Abse, Leo
Dixon, Donald


Adams, Allen
Dobson, Frank


Allaun, Frank
Dormand, Jack


Alton, David
Douglas-Mann, Bruce


Anderson, Donald
Dubs, Alfred


Archer, Rt Hon Peter
Duffy, A. E. P.


Ashton, Joe
Dunn, James A.


Atkinson, N.(H'gey,)
Dunnett, Jack


Barnett, Guy (Greenwich)
Dunwoody, Hon Mrs G.


Barnett, Rt Hon Joel (H'wd)
Eadie, Alex


Beith, A. J.
Eastham, Ken


Bennett, Andrew(St'kp't N)
Ellis, R. (NE D'bysh're)


Bidwell, Sydney
Ellis, Tom (Wrexham)


Booth, Rt Hon Albert
English, Michael


Boothroyd, Miss Betty
Ennals, Rt Hon David


Bray, Dr Jeremy
Evans, Ioan (Aberdare)


Brocklebank-Fowler, C.
Evans, John (Newton)


Brown, Hugh D. (Provan)
Ewing, Harry


Brown, R. C. (N'castle W)
Faulds, Andrew


Brown, Ronald W. (H'ckn'y S)
Field, Frank


Buchan, Norman
Flannery, Martin


Callaghan, Rt Hon J.
Fletcher, Raymond (Ilkeston)


Callaghan, Jim (Midd't'n &amp; P)
Fletcher, Ted (Darlington)


Campbell-Savours, Dale
Foot, Rt Hon Michael


Canavan, Dennis
Ford, Ben


Cant, R. B.
Forrester, John


Carter-Jones, Lewis
Foster, Derek


Cartwright, John
Fraser, J. (Lamb'th, N'w'd)


Clark, Dr David (S Shields)
Freeson, Rt Hon Reginald


Cocks, Rt Hon M. (B'stol S)
Freud, Clement


Cohen, Stanley
Garrett, John (Norwich S)


Coleman, Donald
Garrett, W. E. (Wallsend)


Concannon, Rt Hon J. D.
George, Bruce


Cook, Robin F.
Gilbert, Rt Hon Dr John


Cowans, Harry
Ginsburg, David


Craigen, J. M.
Graham, Ted


Crowther, J. S.
Grimond, Rt Hon J.


Cryer, Bob
Hamilton, James (Bothwell)


Cunliffe, Lawrence
Hamilton, W. W. (C'tral Fife)


Cunningham, G. (Islington S)
Hardy, Peter


Cunningham, Dr J. (W'h'n)
Harrison, Rt Hon Walter


Dalyell, Tam
Hart, Rt Hon Dame Judith


Davidson, Arthur
Hattersley, Rt Hon Roy


Davies, Rt Hon Denzil (L'lli)
Healey, Rt Hon Denis


Davies, Ifor (Gower)
Heffer, Eric S.


Davis, Clinton (Hackney C)
Hogg, N. (E Dunb't'nshire)


Davis, T. (B'ham, Stechf'd)
Holland, S. (L'b'th, Vauxh'll)


Deakins, Eric
Home Robertson, John


Dean, Joseph (Leeds West)
Homewood, William


Dempsey, James
Hooley, Frank


Dewar, Donald
Horam, John





Howell, Rt Hon D.
Roberts, Ernest (Hackney N)


Howells, Geraint
Roberts, Gwilym (Cannock)


Huckfield, Les
Robertson, George


Hughes, Robert (Aberdeen N)
Robinson, G. (Coventry NW)


Hughes, Roy (Newport)
Rodgers, Rt Hon William


Janner, Hon Greville
Rooker, J. W.


Jay, Rt Hon Douglas
Roper, John


John, Brynmor
Ross, Ernest (Dundee West)


Johnston, Russell (Inverness)
Ross, Stephen (Isle of Wight)


Jones, Barry (East Flint)
Rowlands, Ted


Jones, Dan (Burnley)
Ryman, John


Kaufman, Rt Hon Gerald
Sandelson, Neville


Kerr, Russell
Sever, John


Kilroy-Silk, Robert
Sheerman, Barry


Lambie, David
Sheldon, Rt Hon R.


Leadbitter, Ted
Shore, Rt Hon Peter


Leighton, Ronald
Short, Mrs Renée


Lewis, Arthur (N'ham NW)
Silkin, Rt Hon J. (Deptford)


Lewis, Ron (Carlisle)
Silkin, Rt Hon S. C. (Dulwich)


Litherland, Robert
Silverman, Julius


Lofthouse, Geoffrey
Skinner, Dennis


Lyon, Alexander (York)
Smith, Rt Hon J. (N Lanark)


Lyons, Edward (Bradf'd W)
Snape, Peter


Mabon, Rt Hon Dr J. Dickson
Soley, Clive


McDonald, Dr Oonagh
Spearing, Nigel


McElhone, Frank
Spriggs, Leslie


McKay, Allen (Penistone)
Stallard, A. W.


McKelvey, William
Steel, Rt Hon David


MacKenzie, Rt Hon Gregor
Stewart, Rt Hon D. (W Isles)


Maclennan, Robert
Stoddart, David


McMahon, Andrew
Stott, Roger


McNally, Thomas
Strang, Gavin


McNamara, Kevin
Summerskill, Hon Dr Shirley


McTaggart, Robert
Taylor, Mrs Ann (Bolton W)


McWilliam, John
Thomas, Jeffrey (Abertillery)


Magee, Bryan
Thomas, Mike (Newcastle E)


Marshall, D(G'gow S'ton)
Thomas, Dr R.(Carmarthen)


Marshall, Dr Edmund (Goole)
Thorne, Stan (Preston South)


Marshall, Jim (Leicester S)
Tilley, John


Mason, Rt Hon Roy
Tinn, James


Maxton, John
Torney, Tom


Mikardo, Ian
Urwin, Rt Hon Tom


Millen, Rt Hon Bruce
Varley, Rt Hon Eric G.


Miller, Dr M. S. (E Kilbride)
Wainwright, E.(Dearne V)


Mitchell, Austin (Grimsby)
Wainwright, R.(Colne V)


Mitchell, R. C. (Soton Itchen)
Walker, Rt Hon H.(D'caster)


Morris, Rt Hon A. (W'shawe)
Watkins, David


Morris, Rt Hon C. (O'shaw)
Weetch, Ken


Morris, Rt Hon J. (Aberavon)
Wellbeloved, James


Morton, George
Welsh, Michael


Moyle, Rt Hon Roland
White, Frank R.


Mulley, Rt Hon Frederick
White, J. (G'gow Pollok)


Newens, Stanley
Whitehead, Phillip


Oakes, Rt Hon Gordon
Wigley, Dafydd


Ogden, Eric
Willey, Rt Hon Frederick


O'Halloran, Michael
Williams, Rt Hon A.(S'sea W)


Orme, Rt Hon Stanley
Wilson, Gordon (Dundee E)


Owen, Rt Hon Dr David
Wilson, Rt Hon Sir H.(H'ton)


Palmer, Arthur
Wilson, William (C'try SE)


Park, George
Winnick, David


Parker, John
Woodall, Alec


Pendry, Tom
Woolmer, Kenneth


Penhaligon, David
Wrigglesworth, Ian


Powell, Raymond (Ogmore)
Wright, Sheila


Prescott, John
Young, David (Bolton E)


Radice, Giles



Rees, Rt Hon M (Leeds S)
Tellers for the Noes:


Richardson, Jo
Mr. Hugh McCartney and


Roberts, Allan (Bootle)
Mr. Frank Haynes.

Question accordingly negatived.

Main Question put and agreed to.

Resolved,
That this House takes note of the Preliminary Draft Amending Budget No. 1 to the General Budget of the European Communities for 1981, and the Preliminary Draft General Budget of the European Commission for 1982.

Orders of the Day — Finance Bill

Order for Third Reading read.—[Queen's Consent signified.]

The Chief Secretary to the Treasury (Mr. Leon Brittan): I beg to move, That the Bill be now read the Third time.
Our debates in Committee and on Report have been wide-ranging and have quite rightly concentrated on the detail of what the Finance Bill does and does not contain. We can now take stock and look at the Bill as a whole in the context of the Government's overall economic strategy.
For many years our economy has suffered from low growth, caused by high inflation, low investment, and sluggish responsiveness to change. For many years successive Governments have failed to tackle the underlying problems.
This Government, however, are determined to tackle these problems at root. We have put at the forefront the goal of reducing inflation by responsible monetary control because by doing that we are tackling the problem that has been at the heart of our trouble. It is not a question of choosing to tackle inflation rather than unemployment. It is, rather, a recognition that past inflation has been the cause of present unemployment. To embark on a massive reflationary package such as that advocated by the Opposition would simply be to stoke up inflation for the sake of a very small, short-term improvement in the employment position, but with the ultimate consequence of unemployment at far higher levels than we are suffering today. I would be the first to agree that monetary policy by itself is not enough. The support of an appropriate fiscal policy is also needed. That is what this Finance Bill is about.
While adopting that approach in the Budget my right hon. and learned Friend the Chancellor of the Exchequer also fully appreciated that account had to be taken of the pressures and strains brought about by the world recession. The suggestion that the Government have pressed on regardless in an inflexible manner is the product of a fertile propagandist imagination rather than a reflection of what has been happening in the real world.

Mr. D. N. Campbell-Savours: Who said that?

Mr. Brittan: I did. The hon. Gentleman should recognise the inimitable style.
That is certainly not the inflexible approach. It is certainly not how the Government's policy is seen in BL or BSC when confronted by substantial Government expenditure for both those bodies. None the less, action was clearly needed to secure a lower PSBR than would otherwise have emerged. Had the Chancellor presented a broadly neutral Budget the indications were that the PSBR would have been of the order of £14 billion this year. That would have implied the continuation of very high interest rates to fund such a borrowing requirement. Industry would have continued to be very hard pressed, with severe consequences for investment and employment.
The only way to take the pressure off interest rates, and thus help industry, was to raise taxes to cover at least some of the extra expenditure caused by the recession and already agreed to. Because personal incomes had continued to rise in real terms, despite the squeeze on companies, it was right that most of the extra revenue should come from personal taxation.
Between 1977 and 1980 real personal disposable income had risen by one-sixth, while output hardly rose at all. By our concentrating tax increases on personal taxation, industry was able to benefit from a 2 per cent. reduction in MLR as well as help on energy prices and an improved stock relief scheme.
But it is not only to the personal sector that the Chancellor has looked for revenue. The House will need no reminding that the Bill contains two new taxes—the special tax on banking deposits and the supplementary petroleum duty. Of course the bank tax was introduced with regret but the changes made to it during the passage of the Bill demonstrate my right hon. and learned Friend's willingness to be flexible in response to reasonable representations.
The new North Sea tax regime will ensure that the country as a whole continues to benefit from our possession of North Sea oil. Revenues from the North Sea make it easier for us to achieve a level of public sector borrowing that gives private sector industry a chance to borrow and invest on its own account.
The Bill also provides for a further major package of help for small businesses. Pre-eminent among this year's measures is, of course, the business start-up scheme. This is an imaginative and original scheme. Because it is without precedent in any other country, it is not surprising that there was a great deal of interest in the details when they were originally announced. We received a wide range of representations and reactions and obviously we have discussed the scheme at length. My right hon. and learned Friend was able to respond to many of the proposals put to us for strengthening it—for example, by increasing from three to five years the period during which a business qualifies as new.
We also made two significant extensions to the scheme on Report. Distributive trades are now included, and the relief has been adapted to cover the case where investment funds act as nominees so that investors can, if they wish, invest with the help of professional managers.
This is an extremely generous relief. It offers substantial incentives to those prepared to risk their capital to support enterprise, and it is clear that it is now widely welcomed. I am confident that it will make an important contribution to the problems of small firms seeking equity capital.
With this and the other enterprise measures that we have introduced since taking office we have set a climate in which, as the economy starts to come right, new and small firms can prosper and play a leading part in providing the jobs, the innovative ideas and the flexibility for the future.
Taken as a whole, the provisions in the Bill are designed to consolidate our progress in reducing the rate of inflation and to carry forward our anti-inflationary strategy. It will, of course, take time for these policies to bear fruit in terms of higher output and productivity and lower unemployment. We should not expect, nor have we ever expected, a dramatic adjustment in the economy to occur overnight. Yet, so far as the current recession is

concerned, there are indications that the worst is behind us. Industrial-manufacturing output has stabilised since the turn of the year. Unemployment is still rising, of course, but progressively more slowly. Vacancies have stabilised and average weekly hours worked in manufacturing are increasing. There are signs of improved productivity—both in individual companies and in total manufacturing industry. Surveys show that business confidence is continuing to improve.
All those indicators are consistent with the forecasts we published with the Budget, and we have no reason to change our view that there will be some modest growth in output over the next 12 months or so. None of the evidence supports the Opposition's view of an accelerating decline in output.
None the less, the Opposition call for a policy of massive reflation. Night after night in Committee upstairs and on the Floor of the House they have endeavoured to press upon us a succession of amendments that would have deprived the Exchequer of vast sums of revenue. The consequence would have been a huge increase in public borrowing. That could have led only to a damaging collapse of financial confidence, higher interest rates and a reversal of the success that we had in the past year in bringing down the rate of inflation. Above all, except in the shortest run and to a very limited extent, it would not have improved the employment situation.
The right hon. Member for Stepney and Poplar (Mr. Shore) presents his call for reflation comparatively modestly, but the leader of the Opposition is more ambitious, though characteristically more vague. He talks in terms of a reflationary package of £6½ billion. However, it would be wrong to be unfair to the right hon. Member for Ebbw Vale (Mr. Foot), because he recognises that there are certain difficulties in following such a policy. Indeed, he said in Cardiff on 4 July:
Of course, this would only be the start, and such a planned policy of expansion does have implications for our balance of payments, does pose problems of how we are to overcome the kind of bottlenecks in industry and the inflation we have known in the past.
The right hon. Gentleman recognises to the full the problems presented by the policy of reflation which he was advocating so generously.
What is the right hon. Gentleman's answer to the problem that he analysed so candidly? It is an interesting but not particularly illuminating answer. Having outlined the problems that would be caused by the policy that he is advocating, the right hon. Gentleman gave his answer:
These and all kindred problems we are examining afresh with our trade union colleagues.
I do not find that an illuminating answer. It is a sad reflection of the shallowness of the official Opposition's diagnosis of the problem that they put forward their prescription, recognise the problems, but have only those few hollow and shallow words in answer to those problems.
Of course, our problems remain extremely serious. They have taken decades to develop and it would be astonishing if we had been able to overcome them in a couple of years. But the foundation has been laid for a return to prosperity and to steady growth. Inflation has been checked. There is encouraging evidence of greatly improved productivity. Above all, attitudes are changing—to pay, to industrial relations, to working methods. There is a growing awareness that living standards depend on co-operating to make our industry


competitive once more. That is the course to which we must adhere. It is Britain's only hope for a sound economy in the future.
Lord Vaizey wrote in a letter published in The Times today:
The present Government's policy … has one central feature … It is to make business more efficient by making it more competitive. Nationalized industries, big business, trade unions, public regulation—all unite to weave a web of restriction in which economic progress cannot be made. It is a heroic task to sweep this web of restriction away. Initially, as it is done, people lose their jobs. But if the attempt is successful (as it was in Germany after 1948) millions will get better jobs.
Lord Vaizey put the problem succinctly and well.
The objection to a radical change of course now is not that it would involve a U-turn or mean eating our words. The future of our country is far too serious a matter for me to regard either of those considerations for one moment as a serious reason for refusing to change tack if that would really give this nation new hope or new opportunities. But I am profoundly convinced that it would not. It would mean giving up the one serious attempt to tackle our deep-seated problems at their very root. It would mean throwing away the sacrifices of so many people just when those sacrifices are enabling us to emerge from recession with a real prospect of stable advance instead of continuing the steady slide downhill which has lasted for so many sad long years.
To relax now would be the easy way out. It has been followed often enough in the past. That is precisely why things are so difficult now. It is why the process of tackling our basic economic problems has become so painful and so protracted. But it is also why it is so vital not to abandon that task now. The Bill does not do that. It carries the task forward realistically and courageously. That is why it should be read the Third time.

Mr. Peter Shore: We have reached the final stage of the Third Reading of the 1981 Finance Bill. Having heard the Chief Secretary's speech, I am inclined to say "Thank heavens that we have reached this stage". I do not think that I could bear to hear another speech so full of complacency, wishful thinking, shallow thinking, and exhausted clichés as that to which we have been subjected for the past 15 minutes.
The Third Reading comes four months after the Budget Statement and three months after the Second Reading. In spite of debates on the Floor of the House, the most diligent and searching examination of the Bill upstairs in Committee, on the conduct of which I warmly congratulate my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) and the Opposition Front-Bench and Back-Bench team, and two long days and nights on Report, the Bill in its final form is little different from the version presented to us just over three months ago.
Indeed, the only change that deserves a mention is that the Chancellor backed down on derv and halved his original proposed increase in duty, but promptly recouped the £85 million involved by a further impost on tobacco and an increase in a number of betting and gaming taxes.
The Chancellor can, for what it is worth, rightly claim that his Budget is intact. He is still seeking to raise the £3,600 million of additional revenue that he originally

proposed and he is raising it in almost exactly the same way as he set forth in his Budget Statement. The taxpayers of this country have been cheated of even a partial uprating of tax allowances to take account of last year's inflation, in spite of all the pledges and promises that the Treasury team have given.
Those who drink, those who smoke and those who drive will pay an additional £2,000 million in taxation. The unemployed and the families of those on strike receiving social security benefits are brought into the tax net, while those at the opposite end of the income scale will benefit from the virtual destruction and gutting of capital transfer tax.
But if the content of the Bill has survived virtually unscathed during the past four months of debate, the economic environment into which it was originally launched and the assessment of economic developments during the next 12 to 18 months have changed substantially. The Budget is, as I hope to show shortly, already obsolescent, even within its own terms of reference, and totally unrelated to the needs of the nation.
The Chancellor of the Exchequer had the courtesy to inform me that he would not be here for the debate. With the Ottawa conference under way the House will readily understand why he cannot be with us. I only hope that he will not urge on his American counterparts the same disastrous high interest rate policies as he inflicted on us during last year. Secondly, I hope that we shall have an outcome from Ottawa that is less disastrously sterile from the point of view of world output and trade than was the Venice summit just a year ago.
During the course of these protracted debates the absence of the Chancellor has been a noteworthy and recurring phenomenon. It is as though he has become a fugitive from his own economic decisions. Although, as a consequence, we have not been able to debate directly with him since his winding-up speech in the Budget debate nearly four months ago, we learnt from the Chief Secretary in the Ways and Means debate on 6 July that nothing had changed in the real world of the economy to make the Chancellor alter his Budget judgment and, in particular, the size of the public sector borrowing requirement at £10½ billion. We had it on the Chief Secretary's authority that
The Chancellor's view is that nothing has happened since that date to invalidate that judgment".
I beg to disagree.
I refer the Chief Secretary to his statement on Second Reading on 13 April, when he gave his reasons for believing that the Budget measures
enable us to look to the coming year with greater confidence".
Among the encouraging signs to which he then directed us—I agree that he has produced one or two more today, but let us take the ones that he produced three months ago—was the fact that
Output is likely to be on a rising trend over the coming financial year 1981–82.
That, according to the Chief Secretary, was
not just a Government forecast … reputable outside forecasters also see prospects of recovery".
The Chief Secretary reinforced his optimism by
the behaviour of indicator series published by the Central Statistical Office. Longer leading indicators have been rising since November 1979, shorter leading indicators since November 1980 and coincident indicators have levelled out since last November".
Then there was the anecdotal evidence from industry, and the fact that housing starts
rose sharply in January and in February".


Finally, as he put it:
There is hard evidence that the fall in output may be over … The February figures for manufacturing production, seasonally adjusted, were published this afternoon. They show a rise of 1 per cent, compared with January. For total industrial production the figures show a rise of ¾ per cent.".—[Official Report, 13 April 1981; Vol. 3, c. 37–38.]
At the time I thought that the cupboard must be pretty bare for the Chief Secretary to be clutching at so many fragile straws. That is precisely the impression that I got today when listening again to the assembly of inconsequential material with which he sought to fortify his renewed and revived optimism.
How do the scraps of evidence that were served up three months ago look today? First, we know that the Government have received a further short-term forecast—the Treasury June forecast. As that has been leaked to most of our serious newspapers, and as their accounts are virtually identical, I see no reason why we should challenge what they say. According to The Times
The Treasury expects manufacturing output to go on falling and thinks that the country's total production will remain broadly stagnant between now and the end of 1982".
The general view of outside forecasters about the outlook for the growth of industrial production and the GDP is shared by such authoritative forecasters as the OECD, the Brussels Commission and the National Institute.
What about the key indicators published by the Central Statistical Office? The main indicators, as the Chief Secretary knows, were published last week, on 16 July. The coincident indicator, which is supposed to show the current position, has fallen for two months running, after flattening out last winter. The longer leading indicators have shown a fall in the latest month, the first decline since last summer. Thus, both the key indicators published by the CSO, which gave the Chief Secretary such comfort in the April debate, are now showing the opposite trend to that which they showed three months ago.
Then there are the housing starts. We now know the figures not just for January and February but for March, April and May. I remind the Chief Secretary of what they indicate. In the past three months housing starts have been 4 per cent. down on the previous three months, and 14 per cent. lower than they were during the corresponding three months of 1980.
Lastly, we have the latest figure for the index of industrial production. As I said in the last debate, they do not show any rise. Indeed, they showed a small fall both in manufacturing and in total industrial output for the third month running.
Next, there is inflation, the falling trend of which gave the Chief Secretary such confidence on 13 April. He told us on that date that
the underlying rate is … not much more than 10 per cent. Moreover, inflation is forecast to fall into single figures early next year."—[Official Report, 13 April 1981; Vol. 3, c. 37.]
I wonder whether the Chief Secretary would care to repeat that forecast now. Is it not true that the Treasury's June forecast now shows inflation continuing in double figures throughout this year and most of next, with at best a fall to about 9 per cent. at the end of 1982? How far has even the Treasury's June forecast taken account of the recent overall depreciation of the pound against other currencies, which must add roughly 2 per cent. to the rate of inflation?
My last query concerns the vital matter of unemployment. The Treasury has always been reluctant to give estimates of the unemployment rate. Nevertheless, the public expenditure White Paper, published at the time

of the Budget, gave the Government unemployment assumption for 1981, at 2½ million, and 2·7 million for next year.
In an earlier debate I drew attention to the fact that in June the Treasury had instructed the Government Actuary to revise upwards the 1981 unemployment rate to 2·6 million. However, I believe that that, too, is an underestimate. Tomorrow's monthly figures, as the Department of Employment made haste to inform us, will be inflated by the effects of the Civil Service dispute, which has meant that a number of those who have left the unemployment registers will not have been recorded as such. Meanwhile, the bulk of school leavers will be joining the register now that the school term has ended.
Nevertheless, I think that we are in for a shock tomorrow. The latest Treasury forecast—the June forecast—indicates that unemployment is now heading towards the 3 million mark, and, worse, that it will rise above it, and that there is no indication of any fall in 1982.
I have rehearsed this evidence of the present situation and our future outlook to underline my claim that the Budget—and the Finance Bill, which seeks to express the Budget judgment—is, clearly, four months later, obsolescent. In so far as it was designed to connect with the real economy, the evidence shows that it no longer fits. It is clear that with higher than estimated unemployment and lower than estimated output, public expenditure is bound to increase. I reckon that the cost of employment measures added to it will swell the outturn of the PSBR.
While I do not believe that the Treasury will seriously wish to contest what I have said, I do not think that the new evidence will make the slightest difference to the behaviour of Ministers. We are not dealing with a Government who are moved by evidence, compassion or reason. We are dealing with a Government who are themselves governed by dogma. The figures for unemployment, output, inflation and the balance of payments are not at the centre of their thinking. What matters to them is the money supply and the PSBR. The Bill is designed to achieve a particular outturn PSBR and to reinforce money supply restraint within the target figure of 6 to 10 per cent. The money supply and the PSBR have become the totem and taboo of the primitive monetarist sect which now dominates the Treasury. That is an apt analogy.
According to the Encyclopaedia Britannica, totems in primitive societies were considered to have
superhuman powers and abilities … objects of awe and fear. Though it is generally agreed that totemism is not a religion, in certain cases it can contain religious elements of varying degrees, just as totemism can appear conjoined with magic.
That is certainly the position that money supply, M3, occupies in the mind of the Government.
Equally,
taboo, when applied to the customs of primitive peoples, may be defined as prohibition against certain kinds of behaviour, violation of which is believed to be punished automatically by supernatural means.
That is very near to the Government's approach to the PSBR. We saw that clearly when it was violated by the impious decision to lower the tax on derv, a move that had to be punished automatically by the introduction of immediate and equivalent fiscal penalties.

Mr. David Winnick: On Friday's television programme "Newsnight", the Minister of Agriculture, Fisheries and Food made a clear criticism of


the Government, though obviously in more guarded terms than those of my right hon. Friend. He warned that the Government should beware of economic dogma and the rest. It is interesting to note that no reference has been made by any Minister or Government supporter to that comment.

Mr. Shore: My hon. Friend is right. The truth is—and it will come to be recognised, because it will come out—that what I have described as the primitive monetarist sect which at the moment dominates the economic Departments and No. 10 in no sense represents even the majority view of Conservative Ministers. That will be clear for the record and for history, although it is the last thing that Treasury Ministers would dare to concede today.
It is one thing for the Government to worship the money supply totem and to venerate the PSBR taboo. It is quite a different matter when it comes to imposing these primitive beliefs on the men and women and the diverse institutions that make economic events in the country.
Last year the PSBR taboo was broken to the tune of £5 billion, when the outturn reached £14 billion against a Budget target of £8½ billion. This year, the evidence is already plain that the PSBR will again be higher than the sum for which the Government budgeted. The Government already face new and large demands for additional public expenditure. No one in his senses can doubt that large expenditures will be needed if the Government's promise of job training or work experience for all of this year's school leavers is to be achieved.
The £1,000 million package proposed by the Secretary of State for Employment to alleviate unemployment, especially for the young, is, we now know, still being discussed in the Cabinet. The events of the last few weeks in our cities have given the argument for such measures additional strength and urgency. This will come on top of the additional costs arising from higher unemployment and the additional financing for the National Coal Board and British Telecom, which has been announced since the Budget debate.
This autumn, when the present public expenditure exercise is resumed, the Government are committed to seek further cuts to reduce next year's PSBR along the lines of their medium-term financial strategy. I do not believe that further significant cuts will prove to be possible. If in some way they were achieved I do not believe that there would be any net saving in public expenditure arising from them. Further cuts are bound to have an impact upon other public expenditure programmes, including the financing of still higher unemployment. It will largely wipe out any apparent reductions in public expenditure.
As for the M3 targets, as I remarked during our last debate, there is a statistical fog which has followed from the Civil Service dispute. But here again I recall the outturn of last year. Then, M3 was supposed to fall within the range of 7 to 11 per cent. That was the most important objective of Government policy. In the event, it was almost double the top figure of the range. I shall be surprised if there is not a substantial overshoot in this year's 6 to 10 per cent. target.
All this must matter enormously to the Government and, I assume, worry greatly Treasury and other Ministers. They have said little about these matters in recent months

and recent debates. Since I venerate neither totem nor taboo, the money supply and PSBR figures cause me little unease. I am much more concerned about the real indicators—unemployment and the output of our economy. But I am concerned with M3 and the PSBR, in that they are likely to influence the Treasury and to lead Treasury Ministers to still more damaging economic policies.
The Third Reading of the Finance Bill sets the seal on yet another year of economic failure and mismanagement. During the Second Reading debate on 13 April the Chief Secretary told us that the Government had two major objectives: first and foremost, to reduce inflation; secondly, to improve the supply side of the economy.
I have already described the outlook for inflation. For the supply side of the economy, it is clear that the Government have no policy. Here again they are the prisoners of dogma.
In a speech to the St James's club in Manchester last Friday the Chief Secretary spelt out in some detail what he meant by "supply side policy". He said that it was, in essence, to remove unnecessary distortions to market forces and to allow
the invisible hand of the market to replace the visible hand of bureaucracy.
While all our competitors are trying their utmost to identify the growth industries in the 1980s and 1990s and to take Government action to assist their industries to exploit the opportunities of the future. Britain, under its present mangement, is doing its utmost to pull out of Government intervention in industry—to denationalise as much of the public sector as they can. These policies have not worked and will not work. There is a deficiency of demand in the British economy, and that deficiency has been increased enormously by this fiscally deflationary Finance Bill. Industry will not invest unless there is a reasonable prospect of selling its output, and with output as far below capacity as it is today the prospect of increasing investment is remote.
I do not know what further misfortunes must befall the British people and the national economy before this stubborn Government and their primitive economic doctrines are overturned—but overturned they will be. This is a bad Finance Bill, embodying as it does a perversely wrong Budget judgment about the needs of our economy. It is a Bill which not merely accommodates itself to the record unemployment level which existed in the early spring of this year but increases that unemployment deliberately by reducing purchasing power by a further £4,000 million.
The Government's excuse is that they must deal with inflation first, as we heard yet again today, and that we cannot have increasing employment unless and until we tackle inflation. There is no evidence for that assertion. While inflation has harmful social and economic consequences, experience here and in many other countries over the years has shown wide differences in growth rates and in unemployment and inflation levels. Germany has had low inflation and high output for many years. Italy, Japan and Brazil have been traditionally high inflation and high growth countries. Switzerland is a low-inflation and low-growth country. There is no simple relationship between growth and inflation. Against that background it is no good the Government pretending that


they are as concerned about unemployment as the Opposition are. It is sheer hypocrisy for them to make such a claim.
The country is crying out for a change of policy, for measures that will reduce, not increase, unemployment generally and youth unemployment in particular, for measures that will increase investment in worthwhile projects in both the public and private sectors of industry, for substantial housing and infrastructure investment, and for the renewal and revitalisation of our decaying and tense inner cities.
The Finance Bill and the economic policy that it seeks to serve denies the real needs of the people and the economy. For these reasons, the Opposition will vote against the Third Reading.

Mr. Peter Hordern: The right hon. Member for Stepney and Poplar (Mr. Shore) indulged in a good deal of hyperbole. I am not clear from his remarks what his own prescription for our economic difficulties is. He said about my right hon. and learned Friend the Chancellor of the Exchequer that he was following a policy which involved the admiration of a totem pole so long as it was not taboo, but I am not clear which totem pole the right hon. Gentleman and the Labour Party are worshipping. He was critical about our level of interest rates and of the level of United States interest rates, but I was surprised when he ignored the fact that interest rates in France are a good deal higher than they are here. We are not a high-interest rate country at all.
I do not know what the right hon. Member would do if he were in the position of my right hon. and learned Friend, but if he were to reduce interest rates I assume that he would also increase the amount of money that the Government needed to borrow. I cannot see how the two would go together. The right hon. Gentleman was not anxious to spell that out this evening.
It is time that the Opposition made it clear, when talking about reviving our industry and our city centres, just how the money can be found. Is it by additional borrowing, taxation, or by printing money? All three have been tried. I notice that the Leader of the Labour Party has joined the ranks of those who say that they will cut taxes, so additional taxation is not open to them.
The Opposition would not borrow additional money because they must know that interest rates would rise significantly. They are left with only one alternative, and that is to print more money. That exercise has been tried before with the most disastrous results for inflation. Is that what the right hon. Gentleman is suggesting the Government should do? It is time that the Opposition spelt out their policies. I do not think that the Leader of the Opposition cares to spell out economy policy in any great detail or clarity. It is not possible to accept his statement that taxes can be reduced while at the same time not increasing borrowing.
The right hon. Member for Stepney and Poplar did not say what policy the Opposition would adopt to control inflation. He never mentioned his affection for a prices and incomes policy—that is the policy of the Social Democratic Party. He keeps very quiet about that. Now, when he is quite safe with the right hon. and hon. Members who are sitting behind him—there are very few of them—he could have spelt out his policy. However, he would not say that he believed that the only possible policy

was that of prices and incomes. I am looking forward to the day when that policy is properly spelt out. I doubt that we shall hear it soon.

Dr. Jeremy Bray: If the hon. Gentleman feels that a prices and incomes policy is a viable alternative to the monetary targetry in which the Government have been indulging, does he regard the Chancellor's talk of a national cash limit and the Chief Secretary's talk about targeting on GNP—national income—as indicating that the Government are making a gradual movement in the direction of an incomes policy?

Mr. Hordern: The hon. Gentleman is one of the nicest Members in the House. He always takes the charitable view that hon. Members share the same indulgent view of the prospects of the economy that he holds. I have not believed in a prices and incomes policy for many years. Experience has shown only too clearly that it is a disastrous policy.

Mr. Bray: Do the Treasury Ministers believe that?

Mr. Hordern: I do not sit on the Front Bench. The Treasury Ministers are capable of answering for themselves. I have observed no indication of a prices and incomes policy—I hope that there will not be one—save for the public sector, which is a different matter. It is of the greatest importance that wages and salaries should be controlled in the public sector. I do not know who, other than the Government, can be responsible for controlling them. The problem is not only the level of salaries—which was exacerbated by the level of settlements for which the Labour Government were responsible under the awards of Professor Clegg—but the number of people recruited, even by this Government. That has been taking place for 20 years. There has been a continuous growth in recruitment in the public sector, especially the National Health Service. In 1960, 21 years ago, 575,000 people were employed in the National Health Service. In 1980 there were 1·2 million. That number grew last year by 25,000.I have no doubt that the figures will show a further increase this year. Furthermore, the Secretary of State for Social Services has no intention even of inquiring into the purpose of that recruitment. Therefore, it will continue until something is done.
The additional cost of wages and salaries in the NHS last year was £980 million. I do not think that it is possible to defend such an enormous increase in one year. It would have been a great deal better had we spent some of that money on construction and capital expenditure rather than current expenditure. Nor, I regret to say, is it only the NHS where recruitment has continued to advance quickly for very many years. It has happened in the education service. I find it remarkable that among those who serve in that area, who neither lecture nor teach on a part-time basis, the number increased from 93,000 20 years ago to 475,000 today. I do not need to be persuaded that there is considerable scope for reduction in current public expenditure if the Government will only seize the opportunity of stopping continuing recruitment in the NHS and other areas of our economy. That will provide an opportunity to increase capital expenditure, which Britain so badly needs.

Mr. Campbell-Savours: The hon. Gentleman criticised the NHS for hiring additional people during the past 12 months. Does he accept that his policy would mean a


reduction in the number of nurses and doctors, and perhaps even the closure of hospitals, in his constituency? Does he think that his constituents elected him to promote that policy?

Mr. Hordern: The hon. Gentleman must try not to be too absurd. I am suggesting that there should be a curb on recruitment in the NHS. It is quite unreasonable to cut the services in the NHS—which is happening—and at the same time to continue to increase the numbers employed, especially the number of administrators. The proportion of administrators to doctors has doubled during the past 10 years.
One concern should be the level of capital expenditure in the public service. I should like to see that increased as long as it is done within the confines of the PSBR generally. There is a strong argument, which my right hon. and learned Friend the Chief Secretary put forward, about the element of what is called crowding out. If the public sector needs to borrow too much money there will be less money for the private sector to borrow, and if it can borrow it will be at advanced rates of interest. I do not think that the argument about crowding out is as straightforward as has been suggested.
I have observed that the institutions that provide funds for investment and Government are at the same time, quite properly, investing considerable sums of money abroad. Last year they invested £2,000 million aboad. It is strange that, for example, the Prudential should invest enormous sums of money in the American Telegraph and Telephone Company and the Hong Kong Light and Power Company, without being able to invest in, for example, the Electricity Council if it wished to build nuclear power stations. It is strange that the institutions can invest in such companies without investing in telecommunications in Britain—for the simple reason that that industry happens to be in the public sector. I do not wholly accept the crowding out argument, but I accept my right hon. and learned Friend's argument, which he put forward strongly, that we cannot allow such industries to be financed from outside and yet retain an element of Government guarantee. I am firmly of the view that investments in the telecommunications industry—and perhaps in British Rail, although I am not convinced of that—should be allowed. If they are not to be denationalised, at least they should be privatised so that the majority stake can be sold outside and a genuine element of risk imported. I hear my right hon. and learned Friend ask "How?"

Mr. Brittan: I did not.

Mr. Hordern: I am so sorry, but if my right hon. and learned Friend wishes to know how, I refer him to an article that I wrote in The Daily Telegraph a short time ago. I genuinely believe that there is some method of financing such investment, and that a way should be found of doing this. I cannot believe that it is right for a Conservative Government to spend most of their capital expenditure on trying to prop up the steel industry and the ailing motor industry without allowing any money to be available to the telecommunications industry or some of the more progressive parts of industry that happen to be within the public sector. I hope that my right hon. Friends will consider these matters during the coming year. Such investments should not be ignored solely because they

happen to lie within the confines of the public sector. The answer is to get at least part of them out of the PSBR, to let them be financed and to let them find their way in the market.

Mr. John Horam: The fundamental message of the Finance Bill is one of deflation at a time of severe slump. The equally clear message of the Warrington by-election is that that is unacceptable to the British population. The second clear message from Warrington is that the absurd economic policies of the Labour Party are also unacceptable.

Mr. Campbell-Savours: We won the by-election.

Mr. Horam: I remind the hon. Member for Workington (Mr. Campbell-Savours) that there was a 23 per cent. swing against the Labour Party and to the Social Democratic Party, with Liberal Party support. People are clearly turning to the sensible reflationary measures outlined by Roy Jenkins during his campaign.
We need, for example, a worthwhile programme of investment in public industries. I am glad to note that the hon. Member for Horsham and Crawley (Mr. Hordern) has grasped the point about crowding out. It is one that his colleagues on the Treasury Bench ought to have grasped a long time ago. It has been made repeatedly by many commentators and I am sure that it is valid.
Of course we should choose our public investments with care. Like the hon. Gentleman, I am sceptical of some of the more fashionable suggestions. British Telecommunications is a example that the hon. Gentleman cited and is one which I support. There are smaller companies engaged in high technology, such as Nexus and Inmos. These companies are helped by the National Enterprise Board. They are sensible candidates for more public investment. That policy could be embarked upon with a probability of its showing a good rate of return. Indeed, it could meet the rate of return put forward by the Treasury. I have no doubt that 5 per cent. would be achieved by most investments of that sort.
Secondly, we need a major programme of housing renovation. Shelter calculated recently that the number of unfit houses has increased from about 2·5 million in 1980 to around 3·5 million now. That is where the Government's cuts have hit hard. Their effect on the housing programme will have serious social consequences. If we invested in housing, the effect on imports would probably be less than in any of the other areas that have been mentioned.
Thirdly, it is apparently beginning to be accepted by the Government that we need a package of measures to help the 16 to 18-year-olds. More Government financial assistance is needed for the industrial training boards. The Government should be thinking not of pulling out, but of re-inforcing their help for the boards.
We must ensure that youth employment and youth opportunities schemes provide more real traning. So few of the schemes have a real training element, and so few of the young people who take part in the programmes have something that they can use after they have left the programmes. Grants could be given to employers to take on more apprentices. We should be concerned about the decline in the munber of apprentices and apprenticeship schemes. We can do much in that area for the 16 to 18-year age group.
Fourthly, we could do a great deal in direct job creation for those who have been unemployed for more than six months. We must not forget that about 1 million have been unemployed for this length of time. It is perfectly feasible to encourage private employers to take on those who have been unemployed for six months or more. It costs the Government about £70 a week to keep each unemployed person on the dole. That money could be used as a grant to help employers take them on as additional labour.
Fifthly, some of the social services, especially those that rely on female labour, could be re-expanded. I am thinking, for example, of home helps. To re-expand that service would be sensible from an employment point of view. It would help to keep down costs within the public sector. It would also be beneficial to the elderly, who face severe problems as a result of many of the measures taken by the Government over the past two years.
In the five areas to which I have referred, which are similar to those to which Roy Jenkins drew attention at Warrington, we have a sensible reflationary, job-oriented package. We calculate that it would cost about £3 billion over 12 months. If it were run for two years it would cost about £6 billion. That level of reflation could be afforded without taking exceptional risks in terms of inflation and the balance of payments. I think that we could probably go further than that in a policy of reflation, but I accept that if that were done we would need a tough incomes policy to accompany a further degree of reflation.
The measures that I have indicated in the five areas to which I have referred could be implemented while continuing with present policies without unacceptable risks of inflation and an unhealthy balance of payments. If we were to go further, we would have to have a severe incomes policy to contain the inflationary effect and the balance of payments effect. I am glad to see that the hon. Member for Motherwell and Wishaw (Dr. Bray) appears to accept that.

Dr. Bray: I take it that the hon. Gentleman is advancing his view. Presumably the inference to be drawn is that this is not the Social Democratic view but the Liberal view.

Mr. Horam: No. I am not making a speech on behalf of the Liberal Party; its members can speak for themselves. I was saying that beyond the programme that Roy Jenkins set out in Warrington I feel that we could afford more reflation. However, in my view we would require a tough incomes policy to accompany it. In the absence of such a policy the risks would be unacceptable. I was interested to note that Lord Kaldor was arguing in these terms only recently. He seems to have changed his tune somewhat on import controls. He is now arguing for a tough incomes policy.
The programme that I have outlined made sense to the electors of Warrington. What would be wrong in the present circumstances would be to embark on the wild splurge of reflationary measures outlined by the Leader of the Opposition in Cardiff. The right hon. Gentleman attached no bill to that programme. Various attempts have been made to estimate what it would cost. One estimate is £15 billion. That was from the Conservative Party and is perhaps slightly biased. Another estimate was by an economist working for a television company, and therefore perhaps slightly more independent-minded. That estimate was £22 billion.
That sort of figure is fantastic and absurd, and would lead to the level of inflation that the Leader of the Opposition faced when he was Secretary of State for Employment in the early years of the last Labour Government. Inflation would be at 25 or 27 per cent. if we went in for that sort of wildly reflationary approach. That would be ridiculous in terms of any sensible, controlled reflation of the economy.
It was clearly the view of the electors of Warrington that that policy was not acceptable. Moreover, the Labour candidate there clearly insisted that he was fighting on the policies of the Labour Party. [Interruption.] I have indicated clearly what my programme costs. It is the Labour Party which always refuses to indicate the costs of its programme. The electorate of Warrington rumbled the Labour Party and swung heavily against it. Never in the history of party politics has a programme been so expensive, so ill-conceived and so unappreciated.

Mr. Hugh Dykes: Earlier in the speech of the hon. Member for Gateshead, West (Mr. Horam) we saw just the beginnings of a real row breaking out between the former Labour Party and the new Labour Party, if I may use that title.

Mr. Horam: The SDP is not in any sense the new Labour Party.

Mr. Dykes: I stand corrected on the title of the new formation. It will all have to emerge later, in order to clarify the understanding of people here about the SDP, so that we may know in a little more detail what some aspects of SDP policy will be. We have had a glimmering tonight of the campaign speeches of the party's candidate in Warrington. Certainly the former Labour Member for Gateshead, West—now the SDP Member—was right in saying that the old Labour Party has no recipes whatever to give to this country or to this House to solve the problems of the British economy.
The whole context and background of the debate—and, I suppose, the whole necessity for severe Budgets in recent years under the Conservative Government—has been that years of decline were injected into the British economic system by Labour policies of one kind or another. I cite mostly the disastrous, wasteful and useless nationalisation that the Labour Government insisted on inflicting on a hapless British economy at a time when no one wanted it.
In the previous debate, on the EEC budget, the right hon. Member for Stepney and Poplar (Mr. Shore) said, as usual, how terrible it was that our net contribution to the budget was £500 million-plus. Yet previous Labour Governments, from 1964 to 1970 and from 1974 to 1979, spent, at current prices, more than £10 billion on wasteful, useless nationalisation, mainly of industries such as steel, which are now in a parlous state and, coincidentally, producing a deficit of about the same size as our current net contribution to the EEC budget.
When the Labour Party—ailing, flaccid, quasi-Marxist and worn out with its own internal arguments—has the impertinence to put to the House any economic solutions, the whole House will collapse in laughter. I am sure that that must have been the reaction in Committee whenever Labour spokesmen put forward any so-called constructive ideas. They have nothing to propose or suggest to the House.
At least one was able to listen with interest to the new party, the SDP, and perhaps we shall hear the Liberal spokesman, if he catches your eye, Mr. Deputy Speaker. They perhaps have some new ideas about the British economy, but there is nothing at the moment from the official Opposition. After last week's by-election result one wonders how long the Labour Party will remain the official Opposition.
There have not been any very significant changes in the Finance Bill, but those that have been made are welcome improvements. I have in mind, for example, the changes in the agency workers' clause and in the business start-up scheme. The documentation on the scheme remains extremely complicated. I suppose that it is too late to hope for simplification of the text. None the less, the fact that collective entities can now join in the start-up scheme is a very good development.
I so should like to make one point in connection with VAT. It is a special one relating to small shopkeepers and those in the category of repayment traders. It may have been debated in Committee. I am thinking particularly of pharmacists who may have a very high prescription content in their businesses.
I have been in the Chamber all day and may be out of touch with the latest news, but if the civil servants are now to end their industrial action and accept the Government's latest offer I plead with my colleagues, the Treasury Ministers—and in particular with the Minister of State, who is to reply to the debate—to bear in mind the severe plight of people in the category to which I have referred. I have several local cases and I shall be sending the details of one to the Department.
Pharmacists who have a high prescription ratio can easily end up—as some have done—being absolutely stripped cash, on the verge of bankruptcy and having to overdraw at high interest rates from the banks to support their cash flow deficit because the Customs and Excise has not made the VAT repayments. Pharmacists have to pay VAT on their inputs, but not on the outputs if they are prescriptions and other registered transactions within the National Health Service. That is only one example, but a severe one, on an important category of small trader. If the civil servants are to return to work quickly I hope that the Customs and Excise will make the repayments speedily, without any further undue delay—or will at least make ex-gratia payments of a significant size to bear the interest charge equivalent to people in the worst plights, depending on the evidence, and perhaps with independent attestation. That may be a small point, but it is so important that I register it and I hope for an answer tonight or at least in the near future.
I come now to perhaps the most important part of any Third Reading debate on a Finance Bill as traditionally encapsulated in the House—the economic situation. I do not think that I shall be misunderstood on the Conservative Benches if I reiterate in a fairly mild form—because we understand how difficult it is to run the British economy, which is awkward to administer—my feelings of at least relative dismay at the nature and tenor of this Budget. There was a substantial impression that a huge amount of additional deflation at this time was wrong. I can understand why my right hon. and learned Friend the Chancellor of the Exchequer thought that it was necessary. His main priority was to try to control the public sector

borrowing requirement upsurge and the money supply. I have deep sympathy for my right hon. and learned Friend because it is not his fault. It is just an irony of the operational characteristics of the economy and the public sector that things have not worked out like that, even if his intentions were good.
My right hon. and learned Friend the Chief Secretary is extremely resilient and a first-class member of the Front Bench. I know, therefore, that he will not burst into tears if I say that I thought that some of his remarks were slightly complacent. A worrying economic situation is developing, and it is not merely registered by the perhaps more extreme theatrical utterances of people such as William Keegan, in The Observer. It has also been mentioned in other papers, including Sunday newspapers that have supported the Conservatives strongly in recent years on the main tenor of the Government's strategy—the reduction of inflation. I think that all hon. Members would still support that as the priority.
However, as time goes on, the other priority of unemployment begins to rise. When does it pass the priority of inflation? Perhaps not yet, but it probably will do so in the near future, on current indications and patterns—

Mr. Austin Mitchell: It did, in 1980.

Mr. Dykes: Bearing in mind my earlier remarks about the Labour Party's ideas on the economy, this economic debate is confined to the SDP, the Liberals and the Conservative Party. The Labour Party has nothing to contribute on these ideas. By definition, it is the party of inflation, so I do not have to listen to sedentary comments from that quarter.
There is a worrying scenario developing whereby it may be difficult to achieve a significant additional reduction in the rate of inflation. That is what the indicators are likely to bear out. If that is so, it is not right just to continue with a reiteration of the old message. It is a cardinal and respectable tenet of Tory philosophy, in Opposition as well as in Government, to adjust policies as time goes on in a pragmatic and empirical way to deal with the new development of economic problems. The combination is therefore giving rise to anxiety in many quarters, including, of course, among captains of industry. There is a disturbing combination of a fall in output and a progressive rise in unemployment, and an indication that inflation may be beginning to rise again, although the Government are determined—we respect and support them wholeheartedly—to try to continue the reduction in the rate of inflation. Now we have this latest anxiety of a renewed rise in interest rates.
Although I accept the extreme difficulty of measuring these things properly, I believe that the margin of spare capacity in the British economic system is large in all respects—in human and capital resources. It is an unprecedentedly large margin, at least in the post-war period, and we have to go back to the 1930s to see similar percentage figures. If that is so, and if there is manifestly no demand pull inflation in the system, it is possible to take respectable expansionary measures of one kind or another—the House needs a separate debate on what they could be in more detail—without giving rise to an increase in the rate of inflation at the margin. Indeed, in so far as costs would, therefore, be spread over a larger output, I


presume—that is classic but none the less unchanging as a reality—that it would have a depressant effect on the rate of inflation, rather than increasing it.
It is in that context and against that background that I hope that the Government will realise, when they discuss the question of more cuts in Cabinet and elsewhere—and I agree with my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) on the virtues of further cuts in revenue and current spending—that that may be difficult to achieve now because of the stage that the economy has reached. Although I was extremely keen on that, and have been all the way through, it is perhaps now harder to contemplate that than it was a year or two ago.
We are coming to a time when there will be new ideas and proposals coming up from all quarters, including the Conservative Party, on what has to be done in taking the economy forward and getting recovery both nationally and in co-operation with our allies and the United States. The Ottawa conference is, therefore, an apposite topical background. I am optimistic that there will probably be new thinking there because the world leaders are so concerned about the situation.
We cannot just go on contemplating an inexorable rise in unemployment without considering additional measures to deal with it. There may have to be a fully-fledged programme that would guarantee a job or a job equivalent post of the kind alluded to earlier for every single young person. Indeed, the more that time goes on, the more we see that the pressure for concerted international action to get the Western world economy going again is growing and becoming inevitable and should, therefore, be recognised realistically by all concerned.
The Finance Bill is really the operational mechanistic expression of the Government raising money, changing some tax laws and continuing their manifesto programme. That is all very well and there is therefore no problem about it intrinsically, but in that context, because it does not go far enough itself, we are bound to see in the future additional measures, some of which may come in other Finance Bills.

Mr. David Ennals: Although the hon. Member for Harrow, East (Mr. Dykes) speaks for a party that obtained only 7 per cent. of the votes in Warrington, I shall not now make deductions from that event, as we are here to debate the Finance Bill.
However, I cannot let pass the hon. Gentleman's accusation that our Front Bench has made no proposals for expanding the economy. My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) has done so on a number of occasions. Indeed, the Chief Secretary referred to policies put forward by my right hon. Friend and my right hon. Friend the Leader of the Opposition. He pooh-poohed the idea that we should discuss with the trade union movement ways to expand our economy and rescue Britain from the devastation created by the Conservative Party. However, it makes no sense for the Government to proceed as they are without discussions with the trade union movement and the CBI.
The hon. Gentleman said that the Chief Secretary was slightly complacent. I believe that his presentation was extraordinarily complacent. He said that he was talking about the real world. He appears to have escaped from it in the Treasury. He said that certain things would happen as the economy began to come right. Tragically, it is not

coming right; it is still getting worse. He said that the worst was past. I wish that that were true, but the unemployment figures when they are published will show that the worst is not past. The hon. Gentleman mentioned signs of productivity and slower increases in unemployment. He was taking credit for the decrease in the inflation rate. It is no use the Minister shaking his head. Let us consider the taxes and prices index. That index, which was created by his party and which he thought would be fairer than the retail price index, now stands at about 14½ per cent. Even the retail price index is unlikely to go into single figures for a very long time.
The Chief Secretary's whole approach in talking about new hope, new opportunities, the return to prosperity, and all the other fine phrases in his beautifully written brief, is not part of the real world. I do not know whether he has looked at the survey on which the Association of Metropolitan Authorities based its programme, "Investing in Recovery". That programme was based on an independent study of the economic and Treasury model and produced some striking conclusions. I quote just three:
National output, as measured by Gross Domestic Product continues to fall throughout 1981 and 1982 with the end of the recession not being reached until mid-1982.
Manufacturing output, investment and employment undergo a severe decline throughout the period although the rate of decline moderates towards the end of the period. By the end of 1983, manufacturing output is 12 per cent. lower than at the end of 1980"—
far lower than when the Conservatives took over from the Labour Government—
there are 1,331,000 fewer jobs in manufacturing industry, a reduction of 5 per cent. Manufacturing investment is forecast to fall by over 20 per cent. in 1981, followed by a further 13 per cent. fall in 1982.
Unemployment rises steadily throughout the period to reach 4 million by early 1984, representing an unemployment rate of almost 17 per cent.
The right hon. and learned Gentleman knows that our levels of unemployment are far higher than those of our competitors and our colleagues in the Common Market. The Government know that as we consider the final stages of a Finance Bill designed to put our economy right things are getting worse on almost every index that one might look at.
The Government are whistling in the dark if they think that this Finance Bill, which in my view has worsened the situation almost beyond measure, will somehow be the saviour of our economy for which they hope. I fear for this country and for our people as unemployment figures steadily rise and the Government produce no significant proposals to rectify a situation which has now reached desperation.
It is therefore right not only that the Opposition should put forward alternative proposals for reflation and an expansion of our economy, but that we should also say at the end of this Finance Bill that it is probably the most disastrous that the House has ever passed in the worst economic circumstances that we here have ever faced. The mess that the Government have made in well over two years in office is viewed with no confidence by the people, as was well shown by the 7 per cent. vote that the Conservative candidate managed to collect in the Warrington by-election on Thursday.

Mr. Richard Wainwright: If the wise warnings of the hon. Member for Harrow, East (Mr.


Dykes) about the flattening out of the decrease in inflation, the remorseless rise in unemployment and the catastrophic drop in output back to levels below those of the 1930s, had come not only from a respected Tory Back Bencher but from the Treasury Bench, those of us who are optimists by nature might have felt that there was at least a candle in the darkness. Instead, the Chief Secretary's speech reminded me of the utterances of a deck steward on the "Titanic" just before the iceberg came within view.
Equally, I did not find consolation in the speech of the right hon. Member for Stepney and Popular (Mr. Shore). He was on dangerous and shaky ground when he chose the image of a totem as his concept of what the Treasury is worshipping. At least a totem can be seen and photographed. People can sneak out in the darkness and cut it down. But the image which the Government, especially the Treasury, worship is not as solid and attackable as a totem. It is a medley of shifting images.
Perhaps this news has not reached Stepney and Poplar, but the Government are no longer targeting mainly on the money supply. Pressure of questioning in the Treasury Select Committee has elicited the fact that the shrine at which Treasury Ministers now worship is that of money national income as the target for Government policy. That is significant, and I think that we shall hear a great deal more about it during the season of party conferences and at some more by-elections. In fact, a change has already taken place and Ministers are in retreat from the simplistic concept of targeting on money supply. I look forward with great interest to revelations of their further thinking on that central subject.
In the meantime, this has undoubtedly been the Finance Bill of the missing Chancellor. The moment that the Second Reading vote was announced, the Chancellor disappeared from view. Even the Prime Minister put in a brief and commendable appearance at the Standing Committee, but the Chancellor was never to be seen. [Hon. Members: "She was looking for him."] The only fleeting impression that the Chancellor made was to announce his petty, niggling make-weight for the sensible decision on derv which Conservative Members wisely forced on the Government.
I do not say that simply to score a political point. At a time when the economic indicators have been moving in such a contrary direction to what the Government had previously expected, the Chancellor had a duty to influence the content of the Bill. In the present appalling state of the world economic system it is simply not enough for a Chancellor to wind up the clock of a Finance Bill in a Budget in March and thereafter to let the main aspects of economic policy remain unchanged into July. There were other moments when the Chancellor should have intervened to modify the restrictionary stance that he took in the Budget debate.
The Budget, and the November measures that preceded it, withdrew about £5 billion from the economy. Although many hon. Members felt at the time that that was a perverse judgment, its perversity has doubled and even trebled since then. Yet there was no action from the Chancellor. He was content for the measures that he had devised to go their way substantially unchanged.
The consequence is all too manifest to the nation as a whole. The New Standard, in its market report this evening, sums up the whole grisly situation clearly when it says:
Gloom, doom and disaster dominated the gilts market today. As prices fell away, yields emerged that have not been seen since the sterling crisis of 1976. There are only two stocks which now stand above par … In the money markets, the position is worsening daily. This morning, interest rates took another lurch upwards.
The article say that the pressures on the clearing banks to raise their base rates are very strong. It adds:
Under the old system, the Bank of England would by now have been forced to raise MLR, and the banks would be able to follow. The picture was just as gloomy on the equity pitches.
That is the position today after the Government have had their way with the Finance Bill. They have certainly not succeeded in lifting the spirits or the hopes of investors. However, it is not primarily investors that one worries about. The withdrawal of £5 billion from the economy by virtue of this Bill and other Budgetary measures has contracted our economy just at a time when the world recession would have indicated the need for the beginnings of a gentle reflation to combat unemployment.
I should like to say straight away how much I and my hon. Friends agree with the remarks made by Mr. Roy Jenkins in his so-successful Warrington campaign and reiterated tonight by the hon. Member for Gateshead, West (Mr. Horam). We have to reverse the present heavy taxes on jobs and turn the situation into one where there is a positive incentive to employers to take on young people so that they can have some kind of industrial training, an introduction to industry and, one hopes, be placed on the threshold of sustained employment.
I was even more glad to hear the hon. Member for Gateshead, West go on to say that this should be only the beginning of an expansionary programme. The hon. Gentleman was right to emphasise that as soon as a sustainable incomes policy can be put in place—it cannot come too soon for Liberal Members—further expansion should be set on foot. If the hon. Gentleman can fully and quickly persuade his Social Democratic colleagues that this is the right course, the accord between the Liberal Bench and the Bench that he occupies will, so far as I am concerned, be complete on the economic front.

Mr. Austin Mitchell: Then we can have one speaker instead of two.

Mr. Wainwright: That is not for me to say. In the meantime, the country has to bear the consequences of the highly restrictive set of taxes that are embodied in the Finance Bill. I shall recommend my right hon. and hon. Friends to vote against Third Reading.

Mr. Austin Mitchell: I do not propose to follow the remarks of the hon. Member for Harrow, East (Mr. Dykes), who was defending, with irrelevant arguments, a policy of which he does not approve, as his speech made clear. The hon. Gentleman obviously has to attack the Opposition to cover his disloyalty to his own Government. Nor do I intend to take up the arguments of the hon. Member for Gateshead, West (Mr. Horam), who is now rapidly receding from the Chamber. The hon. Gentleman has been emboldened by the chimera of a moderate by-election success—all by-election successes except those at Grimsby are chimeras—into speaking and


acting as a turncoat, attacking the party from which he sprang, to which he owes his seat and with which he basically agrees. That is a question of taste, but I note in passing that the hon. Member for Gateshead, West, on behalf of the Euro-fun party, pointed out in his speech on the Budget that he would expand the economy and pay for the expansion by increasing the standard rate of income tax. A slightly better proposal, according to the hon. Gentleman, would be to put a surcharge for one year on all rates of income tax. That comes from the man who accuses the Labour Party of wilful overspending. I agree with the hon. Gentleman that we must expand the economy but the expansion must be more vigorous than he indicated. We should pay for it, as he says, by increasing the public sector borrowing requirement and, if necessary, by increasing taxation.
In the main those who accuse us of misguided expansion must face the fact that the burdens of unemployment, lost tax, lost productivity, lost output, and the expenditure of benefits, particularly on unemployment benefits, are now a major drag and constraint on this economy. If we could ease those burdens, expansion would be possible—and expansion itself must ease the burdens.
Our main job today, however, is to say farewell—particularly those of us who sat with the Bill in Standing Committee and throughout the debates in the Chamber night after night—to a bad Budget. The essential fact is that in this Budget we are also saying farewell to monetarism—a policy that is now going out not with the promised bang of prosperity and growth, not with a bang but with a whimper, at the whim of the bankers who instigated it in the first place.
This Budget underlines all the faults of the monetarist policies with which the Tories came in. It is essentially a deflationary Budget. It is a deflationary Finance Bill at a time when the economy desperately needs an expansion of demand and the stimulus to get the economy growing again and to reverse the decline of the last two years.
In the period over which we have been discussing this Budget, all the evidence on which it was claimed by Conservative Members that it was based has changed. It is clear that the economic crisis is getting worse—not better, as they optimistically predicted before the Budget. Yet the Government have averted their face from this situation. The Chancellor has plodded on. Instead of relaxing, when his own Back Benchers allowed him the opportunity, the financial stringency and the deflationary impact of this Budget, he persevered and made the situation worse by the petty, vengeful increase in the taxes on tobacco, bingo, betting and gaming machines—the pleasures of the working man—to get his own back after what his Back Benchers have made him do.
It is too much to say that this Budget is irrelevant, because it is more positively harmful than that. This Budget is the revenge of the small-minded, monetarist dogmatists on the Conservative Benches who, as their only defence, bleated for so long that there was no alternative to policies which have been positively harmful to our economy that they are now well on the way to reducing the economy to a situation so disastrous that there really will be no alternative to the mess that they have created.
All the justifications for the Finance Bill, argued from the first, have now gone. Monetarism is an exploded

economic philosophy. I quote from Professor Galbraith, writing in the latest issue of The New York Review of Books. He says:
A case can readily be made that the English-speaking countries, the United Kingdom and the United States in particular, are currently getting the economic policy that they deserve. Theology, wishful thinking, and a modest resort to necromancy have extensively replaced practical judgment on both sides of the Atlantic. The results are in keeping.
They are in keeping. We are now putting up with the disastrous results of that escape from reality.
Monetarism is a discredited philosophy. The hopes of revival that the Government hold out are themselves discredited. The hope of the unity of the industrial countries in deflationary policies has been removed by the expansionary policies which will now be adopted in France, and by the fact that the Japanese economy is still growing. The American economy, despite all the wilful perversity of the Reagan Administration, is still growing.
Today, the Chief Secretary says that the Conservatives never said that monetarism alone was enough; that fiscal measures were also necessary—although they did once give the impression that monetarism alone was enough. The fiscal measures that they are proposing in this Finance Bill will make the situation worse. The Government are now in a trap. Spending is rising remorselessly as the pressure of unemployment builds up, as more and more people are put out of work and as the decline of the economy hits the nationalised industries. With that, the Government's financial predictions will all go awry, because as spending rises the tax receipts are threatened by the same depression as that which requires the increase in spending. That is the cause of the "we need the money" syndrome that the Minister treated us to so liberally in Committee and that excused all the petty increases in taxation and the Government's failure to increase allowances. Indeed, that was probably the most monstrous aspect of the Budget.
At the end of the "we need the money" syndrome, which has been produced by the economic decline that the Government have generated, we find that the average family will pay more. Instead of starting to pay tax at 45 per cent. of average earnings, tax will start at 38 per cent. of average earnings. The basic rate will be increased from 25 per cent. for the lowest payers to 30 per cent. In the Conservative Party's manifesto, hopes were held out of eliminating the poverty trap. However, it will become wider and deeper because the numbers of those in it will increase by about 40 per cent. In addition, we must consider the way in which the Government are treating single women aged between 60 and 64, with their "little pensions".
The final obscenity is that in addition to those increases in taxation the Government have cut capital transfer tax for the very wealthy. They have given a straightforward set of handouts to a class that
toil not, neither do they spin
At the same time they call for sacrifices from the rest of the community. The only consolation is that the Finance Bill will be the swan song of those narrow dogmatists who have dominated Treasury policy for so long. The change will be forced not by the miners, the Government's Back Benchers or the Minister of Agriculture, Fisheries and Food—who is the siren voice of a Government on the rocks—but by the burning that has taken place in the cities of our blighted Britain of 1981. That will force the


Government to change their policies and to start the expansion that they have long told us is impossible. That will be the result of the policies embodied in the Bill.
The Government will change course because their policies are in ruins and the longer they persevere with such policies the bigger will be the dose of Socialism, of Government spending and of Keynesian stimulus that will be needed to get the country out of the mess that they have created. In addition, there will be a greater need for planning and for the arts that we have advocated for so long. Those arts alone can turn the Government round. Recovery will not follow inevitably, as night follows day, as the Chief Secretary told us. It must be worked for, spent for, planned for and engineered. The Government will have to turn to those arts—which are alien to them in the desperate situation to which they have reduced Britain. They will change course. The Finance Bill is the last monument to the dead sheep, the Chancellor of the Exchequer.
To say that the economy has been savaged by a dead sheep is perhaps too facile an image. That savaging has caused disastrous damage to an economy that can ill afford to suffer. The budget makes the damage worse and must be the sheep's final whimper before it is carried off to the last resting place of dead sheep, namely, the Woolsack. The Government will need to make that change of leadership and of policy. They must admit the truth, namely, that they have wilfully pursued wrong policies for too long and have taken the country down a disastrous road. They have wasted precious time and precious jobs.
British industry has lost one in eight industrial jobs during the two years in which the Conserative Party has been in office. The Budget has made everything worse. It will be reversed because it must be reversed.

Mr. Clive Soley: The Government set out in 1979 to squeeze inflation out of the system and to encourage growth by encouraging entrepreneurs. They have not achieved either objective and have not succeeded in producing a Budget to help to achieve them.
In opening the debate, the Chief Secretary said that he thought that we were through the worst. I note that he did not suggest, as he has acknowledged before, that we might bump along the bottom for some considerable time with a worsening of the unemployment figures. Inflation is still as high as it was when the Conservatives took office, perhaps a bit higher. The indications are that it will go higher and we still have the problem of collapsing industries and bankruptcies. The Government's policy has not been successful and there is no evidence to lead us to believe that the Budget will lift us out of the mess.
It is significant that when the Tories took over they virtually doubled VAT, which had the effect of pushing up inflation. They are now saying to the nation "We have brought inflation down". The only way that inflation has been reduced to its present level—which is still higher than it was in May 1979—is by allowing VAT to work its way through the system.
Several Labour Members have spoken about the tax cuts. I should mention the Minister of State's performance in Committee. I have watched him and listened to him with great interest on a number of occasions. In many ways, he

is a rather endearing character. He is unique in this place in the arguments that he uses. He is incredible. I am sure that he works far harder than anyone else. He is obviously a work horse. I am sure that in the mornings the civil servants in the Treasury look for him under mounds of paper, to find him scribbling away with papers flying over his shoulder with all the enthusiasm of an agitated doormouse. He is doing a fantastic job in his own right.
When we discussed the tax in Committee the hon. and learned Gentleman said over and over again that the Government needed to raise the money, but at the same time the Government are bringing people on low incomes into the tax net and allowing people on high incomes out of it. The cuts in or the virtual obolition of capital transfer tax have troubled us. That is where the hon. and learned Gentleman is unique, because he has argued on the Floor and in Committee that this is a moral question, which has nothing to do with taxation. Time and again he has said that this is a highly emotive subject and that he would prefer not to have morality involved in taxes. I cannot believe that any hon. Member, since the establishment of this place, has argued that there is no connection between morality and political economy. That is bizarre in the extreme. I cannot imagine a political theory for that view. Yet that is what the Minister argues.
There is an immense amount of evidence to suggest that wealth in the United Kingdom is grossly unequally distributed—indeed, more unequally distributed than in any comparable country where incomes are similar. The argument has been that the money will generate wealth. There is no evidence for that. It is difficult to get rich by saving. The way in which people get rich is by inheriting wealth. If the Government want to raise the money and reduce the tax burden that they have been increasing, despite their claims to the contrary, they should begin by taxing wealth.
The Chancellor of the Exchequer will say that that is not possible, that he cannot do it, that that is a moral question and has nothing to do with taxation. In fact, it is crucially important, because nothing is more annoying—to put it mildly—to the average PAYE payer than to see people like the Vestey family or other families, against whom I have nothing individually, getting away with enormous sums of money and paying nothing in tax. At the same time, those at the lower end of the income scale, including those on supplementary benefit, are asked to pay more. That is totally unacceptable.
The Government claimed that they would encourage entrepreneurs to regenerate growth, but there is no evidence of that. The money has gone in investment overseas. I acknowledge that some of that money returns in the form of profit but it does nothing to regenerate industry or to produce the employment that we need.
The attempts to cut public expenditure across the board have massively aggravated the problems in our economy. The Conservative Party is the party not only of high inflation but of mass unemployment. There are no ifs or buts about that. Unemployment is partly a result of the present Government's attack on public expenditure. There is a need to increase expenditure, particularly on infrastructure—roads, sewers and telecommunications. If we do not do that we shell be in trouble.
Housing is also of crucial importance. The two sectors of the economy that have been worst hit by the recession


are industry and construction. Construction could benefit most from reflation because it would not produce imports from abroad.
The key importance of the issue is shown in the recent street disorders. When skilled, particularly young, workers are unable to get employment in our inner cities they move out. They are followed by companies, because they then cannot get skilled labour in the inner cities. A spiral of decline occurs. There is an urgent need for a sensible housing policy to discourage that trend.
A country which does as we have with education must have gone out of its mind. We are not only eating our seed corn; we are burning it. Not to invest in education, particularly adult education and training, is crazy.
It is tragic that in the Western world there are between 20 million and 30 million unemployed people. Money is washing around looking for the highest rate of interest in country after country without being used to meet the needs of the communities involved. It is urgent for the leaders of the main economies in the West to get together to work out a new Bretton Woods agreement. When I read the comments particularly of Conservative Members, it is clear to me that they are saying that they can do nothing, that market forces are at work and outside their control. They are not outside their control any more than they were in the 1930s. If we do not do something, we shall pay dearly.

Mr. David Winnick: My hon. Friend the Member for Hammersmith, North, (Mr. Soley) made an excellent contribution. The Chief Secretary read his Treasury brief like the lawyer he is. I do not know whether he believed a word of what he read. Unlike the Financial Secretary and, perhaps, the Minister of State, the Chief Secretary has, I think, no particular attachment to any economic theory. He is a lawyer, he was given his Treasury brief, and he read it accordingly. He read it well.
We are debating the Third Reading of the Bill at a time of acute economic crisis. Unemployment continues to rise substantially and there is no sign of industrial recovery. That is the background to the great concern that we feel tonight.
The standard ministerial reply to our questions about the economy and unemployment, nationally and locally, is always the same, regardless of the Minister or the Department. The reply is that the Government's task is to provide the climate in which industry can prosper. We say on the Labour Benches that the climate provided by the Government is one in which redundancies, extensive short-time working, bankruptcies and yet more closures are taking place. That is the pattern of events in Britain in 1981.
The Chief Secretary cannot deny that unemployment will continue to rise. The latest figures will be out tomorrow. It will continue to rise throughout 1981 and probably throughout most of 1982.
Not all Ministers, it seems, believe that the right approach is being taken. I intervened during the speech by my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) arising from an interview with the Minister of Agriculture, a senior member of the Government, on television's "Newsnight". He was asked various questions arising from the Warrington by-election. He was asked about any change in economic policy. The right hon. Gentleman said:

I'm asking the Government … to examine the current problems on their merits … and to take pragmatic decisions to get them right.
He added:
If you go for efficiency and don't bother about compassion, then you'll find a situation where such will be the deprivation … that the hostility of society generally will ruin the efficiency.
In a clear reference to the Prime Minister's monetarism, the right hon. Gentleman said that it was wrong for any Government, "including my own", to have a doctrinaire approach to economics.
Any prize for what he was talking about? The Minister also said in the same programme:
As new problems emerge we have to tackle them with new weapons and new methods, and you have to take note of the social and economic changes that are taking place.
I do not know whether the Minister of Agriculture will suffer the same fate as the right hon. Member for Chelmsford (Mr. St. John-Stevas) and get the sack. Perhaps he would consider it better to resign and to state his views more openly on the Floor of the House. Because of the right hon. Gentleman's ministerial position, he has to be more guarded in his media interviews, but he went as far as he could on Friday to dissociate himself from the economic policies being pursued by the Government.

Mr. K. J. Woolmer: Does my hon. Friend recognise that the Minister of Agriculture may be speaking for many silent Conservative Members, particularly those in marginal constituencies in Yorkshire and Lancashire who see the textile industry facing such a massive decline? How would he advise those hon. Members to vote in the Division on Third Reading?

Mr. Winnick: My advice to those hon. Members is the same as that which my hon. Friend would give. They should vote with us against a Third Reading.
The charge against the Government is that they have rewarded the rich and prosperous while the vast majority of our constituents are paying more not just in indirect taxation, but in direct taxation as well. The Government probably won the 1979 general election because of their promise to cut income tax. If we asked our constituents how much they have gained from the tax changes in the Government's Budgets they would laugh dismissively. They are paying more in tax, and that is likely to continue.
We are in a plight which is similar to that of the 1930s. The Treasury and Ministers continue to argue that demand must be reduced. As demand is being reduced, deflation bites deeper into the economy and the recession is turning into a slump.
The Bill is further poison for the economy and for many of our constituents. It is a disastrous Bill, which can only inflict untold damage on the British economy. We all know that by the time of the next Budget the situation will be even worse and there will be even more in the dole queues. That is why we have every justification in voting against the Third Reading.

Mr. Robert Sheldon: In rising to oppose the Third Reading my first thanks must be to my hon. Friends the Members for Blackburn (Mr. Straw) and Edinburgh, Central (Mr. Cook) and to the innovation, at least on the Opposition side, of our talking Whip, my hon. Friend the Member for Grimsby (Mr. Mitchell).

Mr. Campbell-Savours: The cannot-stop-talking Whip!

Mr. Sheldon: In looking at the main features of the Bill—those that will remain in our recollection of what took place on the Floor of the House as well as upstairs in Committee—we see that as recently as last year the Government introduced, in section 24 of the Finance Act 1980, indexation as a fixed approach to Finance Bills of the future and were immediately the first Government to repudiate their own enactments when they failed to index allowances this year.
We are also aware of the taxation of short-term benefits in the Bill and the many injustices that we debated in Committee and on Report. We know that the contrast that we observed in the failure to revalorise allowances must be seen in the context of the handouts on capital transfer tax, whereby the slate is wiped clean and the liability ends every 10 years. It is the contrast between what is given to a few at the top end of our incomes scale and what is denied to the many at the lower end which to many of us will be the abiding recollection of this Finance Bill.
The background to the Finance Bill was probably best set by the Financial Secretary to the Treasury, who made a speech to the Zurich Society of Economics in the Kongresshaus in Zurich. He described something that was happening in this country in January—something which most of us had failed to detect. He spoke of
The breath of fresh air that is blowing through British industry today".
He went on:
we have now"—
that was in January of this year—
more or less reached the bottom, and better times are clearly in sight … As a result, British companies throughout the length and breadth of the country are becoming more efficient, cleaner, tauter, fitter and more productive".
That was the background to this Finance Bill.
It was a time of great hope. It is surprising how a Budget and a Finance Bill never look the same in July as they did in April. However, the difference between the two periods was probably never greater than this year. The first was a time of great hope and great optimism. Possibly the prize for the most ineffable comment, following the publication of the Budget and the Finance Bill, went to the Chief Secretary to the Treasury. He said, in a comment on the Budget on 20 March 1981:
This was a Budget for industry and for economic expansion.
We have seen the effects on British industry during the past few months.
In a Budget for industry and economic expansion one would have expected an investigation into what industry wanted and what it was that those people with responsibility in these matters were wanting. What did industry want, and what did it need? One thing that industry clearly wanted was expressed by the CBI in its demand for a cut in the national insurance surcharge burden, about which we tabled an amendment. It asked for an extra £1½ billion to £2 billion three-year programme of public investment and, in particular, an improvement in the national infrastructure.
The Guardian on 18 July said:
After meeting groups of industrialists, trade union leaders and bankers in the North-west, the Industry Secretary, Sir Keith Joseph, said yesterday that he felt no need for a change of course in the Government's economic policies.
'I have not seen any coherent alternative analyses or set of policies', he said.
There is an interesting comparison between what the Chief Secretary and the Secretary of State for Industry said, and

what the Manchester Chamber of Commerce and Industry said in its North-West industrial report. This is what it said was happening in that part of the country:
Despite optimistic statements to the contrary, there are no indications that anything more than a deceleration of the downward slide of the U.K. economy is taking place. Indeed, both company liquidations and bankruptcies rose appreciably during the first quarter of 1981".
There is an alternative analysis for a start, which is different from that of the Government. The Secretary of State for Industry failed to see that when he went to Manchester. The Manchester Chamber of Commerce and Industry went on to say:
Levels of industrial production … dropped in the year to the fourth quarter of 1980 by approximately 15 per cent.
and represented
the largest fall in any year since the war".
Is this a Budget for industry? The Manchester Chamber of Commerce and Industry, according to its North West industrial report, does not think so. It goes on:
Despite considerable reductions in stock in the first half of 1980, company borrowing from the banking system was at an extremely high level and there is some evidence that many companies have borrowed merely to stay in business.
Is that a Budget for industry?
The Chamber's economic and Industrial Committee is extremely apprehensive that the current depressed state of industry in the North West could lead to the region being unable to take advantage of any possible future economic revival, thus leaving the region in a permanently semi-depressed situation.
Is there no need to change Government economic policies, as the Secretary of State for Industry said?
The chamber went on to say that
government intervention in the North-West and capital investment in the infrastructure could bring significant benefits to the region.
It believes that
transport, communications … are all desperately in need of further capital investment.
Those are alternative sets of policies which the Secretary of State for Industry did not see.
Finally, the Chamber says that it is
apprehensive that the last budget which took approximately £5½ billion out of the economy will have a further adverse effect on economic activity and give no help to hard pressed industry.
Is that the Budget for industry that was required? Is that the Budget for economic expansion that was needed?
What worries me most of all is why the Secretary of State for Industry and the Chief Secretary to the Treasury went to the North-West. What is the point of the Prime Minister's going to Merseyside if she hears only what she wishes to hear? Never have we had a Government with their ears so shut to the anguished complaints of industry and the people.
The Budget is supposed to be for industry and economic expansion. Who are the Government fooling? Who are they deluding? Who do they think believes this chicken-scratching? They have not begun to touch the surface of the problem, let alone to approach the causes.
In the first quarter of 1981, bankruptcies increased by 37 per cent. over the same period in the previous year. Company liquidations increased by 67 per cent. This is the result of the disastrous actions of this Government, as my hon. Friend the Member for Grimsby said.
When industry rightfully complains about the level of the pound, the Government reply by stressing their need for supply side economics. That is a splendid notion. Of course, everyone wants to see quality and design improved and improvements in technology. Meanwhile, we see the


savage cuts at Salford, Aston and Bradford universities, which does not seem the right way to go about bringing in supply side economics.
The Government cannot do very much about the supply side, but they can help to make British industry competitive. They can improve competitiveness by acting against the level of the pound. They can improve it by adjustments to the pound. They can improve the profitability of exporting and reduce the profitability of importing, and the profit that goes into industry can find its way into research, design and other matters.

Sir William Clark: How would the right hon. Gentleman decrease the value of the pound and decrease the minimum lending rate?

Mr. Sheldon: The hon. Gentleman should read the report of the committee of clearing bankers. I agree with that, and I advise the hon. Gentleman to study it with great interest. It stretches to more than eight pages, and it details how the Government can reduce the value of the pound in accordance with what is required.

Sir William Clark: How would the right hon. Gentleman do it?

Mr. Sheldon: I have referred the hon. Gentleman to my sources.
The constriction of home demand and the high interest rates that we have seen have made it impossible for firms in Britain to have a home market for their goods, and, because of the higher value of the pound, they have found it impossible to get export markets for many of their goods at the same time as imports have been coming in at cheaper and cheaper prices.
I can understand that if devaluation and deflation are joined together, industry is forced into export markets. This was traditionally the way that it was done. It was not done very well or very cleverly, but it had that effect. By making it impossible for firms to increase their exports and difficult for them to increase production for the home market, we are constricting them completely. That is what we see in industry today. The Government must intervene in the currency markets of the world. Lord Lever, in his two fine pieces in The Times, headed "The World's Currency Casino" showed the need to intervene in the way that I mentioned. The committee of clearing bankers showed the way that that could be done.
The trouble is that the Government have a theology in these matters—a belief in the free market. Nothing that they see happening in industry convinces them that their preconceived ideas are necessarily wrong. Because the Government have not intervened in the currency markets of the world, much of British industry has been gambled away on the gaming tables of the world's international currency dealers. Industries have been closed, never to be reopened. Many others have been severely damaged.
The effects of Government policies are not bearing specifically on the older industries, while saving, rescuing and improving newer industries. They are impartial in their effects, and affect the computer industry, the man-made fibre industry and the machine tool industry. All those industries blame the high pound and the recession, as well as the Government, for their troubles and woes. We need to take control of our currency to make it work for us and for the industry of Britain.
In the 1970s we heard that whoever was in Government in the 1980s would gain the inestimable advantages of

North Sea oil, and would have the greatest opportunity in the post-war world to bring about the transformation of our economy. All the glory and credit would rightly go to them. What has happened? We have North Sea oil now, but what have we done with it? North Sea oil revenues this year amount to nearly £6 billion. It will be £7 billion in a year's time. Where is that great bonanza that was to do so much to revive the fortunes of Britain? It has gone in high unemployment pay. According to the Chief Secretary's figures, it costs about £3,500 per unemployed person per year. I would put the figure higher. I shall take his figures, however, and even his figure of 2½ million unemployed. That gives a cost of £8¾ billion a year for unemployment pay. It is more than we are gaining from North Sea oil. Even when North Sea oil revenues peak in a few years' time, unemployment pay will be roughly in balance. That is what we have done with our great advantage, which should have been used for our industries and to provide for our future. North Sea oil was our nest egg for the future, not overseas assets. The real nest egg in which we can invest is to pay our people and put them in employment, using and creating skills. That is the only way that we can earn our living, and that is what we always assumed would be the purpose of North Sea oil.
The Bill was seen as increasingly irrelevant before the effects of 3 million unemployed were thought of and while hope in the Government remained. The Bill is like a gravestone. It records the economic mismanagement of the Government and the continuing decline of the economy, as well as the opportunities that have been squandered. The Government appear to be without hope. It is time for them to go. For that reason we shall vote against Third Reading tonight.

The Minister of State, Treasury (Mr. Peter Rees): Tonight we conclude our debates on the Bill. Except for those aficionados who formed the ranks of the Standing Committee, the House may feel that the conclusion is coming not a moment too soon.
I hope that I shall be allowed, without presumption, to congratulate the newcomers to the Opposition Front Bench—the hon. Members for Blackburn (Mr. Straw) and for Edinburgh, Central (Mr. Cook). The hon. Gentlemen were buttressed by the enormous experience of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). I think that those who formed the Standing Committee will agree that they made a notable contribution. I am only sorry that the rigours of the Standing Committee have dispatched the hon. Member for Blackburn to hospital. I hope that he will not long be detained there. I think that he and perhaps everyone else will recognise that Finance Bills are rather masochistic exercises, but at any rate they serve a purpose.
The Bill is long and complex. I take no pride in that. I should like to revert to the four or five-clause Victorian Bills. However, the complexities of the Bill reflect the increasing complexity of our national life and especially our industrial life. There is a feeling that we should attempt to legislate with certainty and precision. I recognise that those are objectives that much too often elude us.
The Bill has been subjected to a good deal of good natured scrutiny and debate. I dare say that no Finance Bill in living memory has provided an opportunity for so many Second Reading speeches. We have had many tonight.
The clichés of the class war were much in evidence during the early stages of the Bill's passage through the House. Mercifully, they receded until tonight.
The Standing Committee came to grips in a practical way with some of the real issues. I am sorry that the right hon. Member for Stepney and Poplar (Mr. Shore) did not involve himself with the Standing Committee. If he had done so he might have developed a clearer understanding of what the Bill is attempting to achieve. All that we have had are six or seven apocalyptic interventions from the right hon. Gentleman.
I cannot remember whether it was the right hon. Gentleman or the hon. Member for Grimsby (Mr. Mitchell) who complained of the absence of my right hon. and learned Friend the Chancellor of the Exchequer. The right hon. Gentleman will be the first to acknowledge that it would be difficult for my right hon. and learned Friend to be present tonight. In my limited experience of Finance Bills I cannot recall any Chancellor who involved himself in the proceedings of the Standing Committee considering the Finance Bill. I am sure that my right hon. and hon. Friends will concede—I hope that some right hon. and hon. Members on the Opposition Benches who bring a fair mind to these problems will recognise this—that my right hon. and learned Friend has made a notable contribution at various stages. No Chancellor has been more assiduous in the conduct of his great responsibilities than has my right hon. and learned Friend.
The right hon. Member for Stepney and Poplar seemed to be bent tonight on an economic rehash of Frazer's "The Golden Bough". I have spent some happy hours with "The Golden Bough". I did not recognise the mutilation which the right hon. Gentleman inflicted on it. He chose to describe the present Treasury team as primitive monetarists. I readily concede that I am no macro-economist. I merely perceive a connection between the money supply and the level of prices. I am not certain whether I should be acknowledged in the select company of Professor Friedman. I am conscious that perhaps Professor Lapper would not give us as high marks for our performance as some of my hon. Friends would like. However, to describe us as primitive monetarists shows a rather crude misunderstanding of what we are attempting to do. It indicates a rather crude misunderstanding of the methods that we have employed.
If we happen to be primitive monetarists, I think that the right hon. Member for Stepney and Poplar, and especially the hon. Member for Grimsby, are primitive Keynesians. Whether Professor Keynes should be regarded as a totem or a taboo I leave to the House to determine.
I ask the Opposition to reflect on their last period in Government between 1974 and 1979. I ask them to reflect on whether their management of demand in the long run left the economy and industry in a stronger or weaker position. [Interruption.] Let me remind the hon. Member for Grimsby that the real growth in domestic product annually between 1974 and 1979 was 2 per cent. On the other hand, the growth in the retail price index was 15 per cent., and the unemployment figures doubled. Either they were remarkably unsuccessful in their demand management, which suggests that it may be a more difficult exercise than they are now prepared to concede—

Mr. Ennals: Will the hon. and learned Gentleman recognise that there is a difference between even a modest growth and a devastating fall in output, which is the record of the present Government? During the period of the Labour Government the unemployment figures may have doubled, but the present figure is dramatically greater, and he knows it.

Mr. Rees: I listened to the right hon. Gentleman's speech, and I recognise the contribution that he makes to our social security debates. I was not certain whether he was well advised to intervene in these debates. Indeed, his intervention just now was singularly ill-advised, because I shall now remind the House of the cost in terms of the debilitation of British industry, the collapse of profits and the increase in the retail price index on an annualised basis of 15 per cent.
The right hon. Gentleman may feel that it was a price worth paying for what was achieved by the Labour Government. [Interruption.] The verdict of the electorate is conclusive in these matters. Let the right hon. Gentleman reflect on that. If he takes comfort from the Warrington by-election, he must be a masochist. His former hon. Friend the Member for Gateshead, West (Mr. Horam) took a rather different view of the sentiments of the electorate of Warrington last week. However, these are small matters, and I should not be tempted into the byways.
As for the apocalyptic utterances of the right hon. Member for Stepney and Poplar, one wonders who writes his speeches for these occasions, because there is a remarkable similarity between them. I think we were told by the right hon. Member for Ashton-under-Lyne that a Budget does not look the same in July as it did in April. I do not know whether my right hon. and learned Friend's Budget and Finance Bill look the same now as in March, but the speeches that we have heard from the Opposition Front Benches have not altered by one iota. The sentiments, the language and the clichés are precisely the same.
I have always believed that the point of a Third Reading debate was to draw together the threads of a Finance Bill. I know that in your benevolence, Mr. Deputy Speaker, you have allowed the debate to run wide. Whether it has advanced our understanding of the problems I leave to posterity to decide, but let me attempt to identify the themes of the Bill.
My right hon. and learned Friend was faced with the need to raise a considerable sum of money—£64 billion—by way of taxes on income, expenditure and capital. I was moved to state the problem with a certain vulgar directness in the Standing Committee, when I said that we needed the money. I have been given a slight Gladstonian colour in the brief period on which I have been privileged to serve in the Treasury. That should warm the heart of the hon. Member for Colne Valley (Mr. Wainwright).

Mr. Richard Wainwright: rose—

Mr. Rees: Apparently it does not warm the hon. Gentleman's heart.

Mr. Wainwright: Does the Minister really suppose that Mr. Gladstone would have debased the House with the persiflage that he has just given us?

Mr. Rees: I am tempted to recall that in high spirits Mr. Gladstone used to dance around with Mrs. Gladstone


in the evening. There was a side to his character that perhaps the hon. Gentleman does not recall at the moment. However, I can say with utter confidence that Mr. Gladstone would have approved of my right hon. and learned Friend's attempt to set the PSBR this year at £10½ billion. He would have appreciated his candour and integrity. [Interruption.] There are sterner Gentleman behind me, and I defer to their rigorous approach.
I have been accused of being frivolous and of not detecting a moral feeling in our debates. I say to those who accuse me of that that I find that gentleman of the cloth are not perhaps at their best when discoursing on political subjects, and therefore I am a little hesitant to moralise on these questions.
I am persuaded that my right hon. and learned Friend was right to set a lower PSBR. Of course, the House will know that there is a certain marginal imprecision in such targets, but if the containment of inflation—sound money, if I may put it in language that I am sure the whole country will understand—and modest real interest rates are essential elements in our recovery, a restrained PSBR—a limited pre-emption by the public sector of the resources generally available—is equally important. That is why I am certain that Mr. Gladstone—and I hope therefore, the Liberal Party—would have supported the Government in the Lobby tonight.
If Liberal Members hesitate about that, let them contrast the objectives that my right hon. and learned Friend sets with the profligacy of the right hon. Member for Stepney and Poplar and his right hon. Friend the Member for Ebbw Vale (Mr. Foot). I have never been able to get out of the right hon. Member for Stepney and Poplar in our many debates this summer exactly what PSBR he feels could be supported by the economy. I give him his final chance tonight. I shall give way if he will tell us candidly what figure he nails his colours to—[HON. MEMBERS: "Go on."]
My right hon. and hon. Friends recognise, as I do, that if there is frivolity and incoherence in these debates it is in the contributions of the right hon. Gentleman and his right hon. Friend.

Mr. Barry Sheerman: If the hon. and learned Gentleman cannot agree with my right hon. Friend the Member for Stepney and Poplar (Mr. Shore), perhaps he can agree with the Minister of Agriculture, Fisheries and Food. What does he feel about his right hon. Friend's behaviour and speeches? That is more to the point.

Mr. Rees: The Cabinet, of course, speaks with one voice, and my right hon. Friend is a gifted contributor to its debate. However, since I am not privileged to attend, I do not know the nuances of his contributions, but history will no doubt disclose them.
As I said, I contrast the rigour and self-discipline of my right hon. and learned Friend with the utter frivolity and incoherence of the right hon. Member for Stepney and Poplar. I have tentatively costed out the programme that he and his right hon. Friend have so far produced. On the most cautious estimate it would involve a PSBR of about £17 billion—[Hon. Members: "Is that all?"] I make every allowance for the fact that the right hon. Gentleman is innumerate, like myself. I should like him to reflect a little and, the next time that we have an opportunity to debate these great themes, to tell us what that would do for

interest rates or, indeed, to tell us what level of real interest rates British industry could support. Perhaps he will tell us how many jobs he believes his programme would create and at what cost—unless, of course, he agrees with his friends on Stirling council and the Greater London Council in the belief that merely padding the public sector payroll will solve this difficult and intractable problem.
The Government recognise—and this is explicit in the Finance Bill—that a public sector borrowing requirement of that level must be paid for. It is being paid for, I readily concede, by an increase in direct taxation, and it is proper and legitimate to debate whether we have the mixture right. I can say only that the pattern of our tax system now is not so very different from that of our Continental competitors who over the past two decades or so have done perhaps a little better than we have.
I readily concede that this is being paid for by a standstill in personal allowances, but I emphasise to Opposition Members, who affected to believe that the Government's tax measures affected only the less well off, that last year we proposed measures for indexing the higher rates which we have not put into effect. Overall, therefore, the income tax burden has borne more heavily on them than on others.

Mr. Soley: Will the hon. and learned Gentleman give way?

Mr. Rees: The hon. Gentleman will forgive me if I do not give way. I have only five minutes left. The hon. Gentleman and I exchanged many pleasant words in Standing Committee.
Finally, there are two new taxes, which I at once admit that no Conservative Administration would readily introduce—the special petroleum duty and the bank tax. The right hon. Member for Ashton-under-Lyne affected to believe that there was a great bonanza which could solve all our problems, but that it was being frittered away on unemployment benefit. He may care to reflect how much has gone into preserving the nationalised sector of our economy—an objective which must surely be close to his heart if not to those of some of my right hon. and hon. Friends.
Having touched upon the more difficult aspects of the Bill, I remind the House of the continuing theme of my right hon. and learned Friend's Finance Bills and Budgets, which is to encourage and stimulate entrepreneurial activity in the private sector. I remind the House of the recasting of stock relief, the enhanced interest relief that will encourage investment in co-operatives and partnerships, the loss relief for investment in unquoted shares, the increased initial allowance for industrial buildings that I hope will stimulate the construction industry and the business start-up scheme that we spent many hours refining and embellishing in the Standing Committee.

Mr. Sheerman: Changing.

Mr. Rees: The hon. Gentleman prefers to call it "changing". I would call it refining and embellishing. The main outlines remain the same.
I also remind the House of the modest measures to humanise and rationalise capital gains tax and capital transfer tax. If the right hon. Member for Ashton-under-Lyne accuses us of disproportion in this area, I remind the House that the first-year costs o f our measures will be a mere £5 million and the subsequent year's costs £20


million. I am more afraid that my right hon. and hon. Friends will say that more needs to be done—indeed, I agree with them, but perhaps not this year.
Against the background of what I readily concede is a rather grey sky, which overshadows the economies of most of the developed world, I therefore believe that the Government may claim without immodesty that this third Finance Bill is a solid legislative achievement.

Mr. Sheerman: It is a disaster.

Mr. Rees: The hon. Gentleman says that it is a disaster. Let us wait upon events. To pretend that one can say on 20 July what the precise consequences will be is a rather arrogant intervention by the hon. Gentleman, who I know can put on a more agreeable face. This Finance Bill marks another milestone on the road—an undeniably hard road, I concede—to put the finances of this country on a healthier basis, to achieve a more sensible fiscal mixture, to strike a better balance between the private and public sectors and to lay the basis for solid and sustained recovery.
On that basis, without, I hope, too much immodesty—indeed, with a certain pride—I am delighted to commend the Bill to the House.

Question put, That the Bill be now read the Third time:—

The House divided: Aves 279, Noes 236.

Question accordingly agreed to.

Bill read the Third time, and passed.

Orders of the Day — Hygiene in Poultry Slaughterhouses

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Jerry Wiggin): I beg to move,
That this House takes note of European Community Document No. 5704/81 amending Directive 71/118 concerning hygiene in poultry slaughterhouses and supports Her Majesty's Government's objective of removing inequalities between Member States in the implementation of that Directive.
The Government welcome the Scrutiny Committee's decision to recommend this document for debate. The subject is of importance to the poultry industry and the consumer and it raises serious questions about the implementation of Community directives throughout the Community.
It may be helpful if I recall first that directive 71/118, which was of course agreed before the United Kingdom's access to the Community, is unlike other meat hygiene directives in that it applies to domestic trade within member States as well as to intra-Community trade. The directive lays down a number of requirements designed to ensure the hygienic production of poultrymeat, including structural standards for slaughterhouses and hygienic practices. However, the main provision which concerns us tonight is the requirement that each poultry carcase which is produced in a licensed slaughterhouse should be inspected under the overall responsibility and supervision of an official veterinary sugeon. The purpose of this provision was to provide a consumer safeguard for poultry-meat similar to that which had previously been available and still exists for red meat, and the terms of the directive make it clear that the intention is not only to reduce the risk of possible food poisoning but also to protect the consumer from other conditions in the meat, such as pus or tumours, which, while not necessarily making the meat unsafe, would nevertheless make it unwholesome.
The implementation of this inspection requirement, which became compulsory in August 1979, required in most member States the introduction of a virtually new poultrymeat inspection service, since previously in most countries there had been very little systematic inspection of poultrymeat. In this country, as hon. Members will know, we have made substantial progress in setting up the inspection service largely as a result of a major co-operative effort involving the Ministry, the British Poultry Federation, the local authority associations and the British Veterinary Association, to all of which I am glad to pay tribute for this achievement. It is fair to say that there were doubts both on the industry and the local authority sides, but nearly all local authorities have now gone a long way to establishing the service required by the directive on the basis of guidelines issued by the Ministry after detailed discussion. These cover both the numbers of poultrymeat inspectors required and the extent of veterinary attendance in poultry establishments.
However, as early as 1979 evidence began to emerge that some other member States were applying the directive in a way which is more favourable to their industries, either through lower levels of inspection or subsidies towards the cost, or both. At our insistence, the Commission undertook to make a study of the implementation of the directive in the various member

States. In spite of frequent reminders by my right hon. Friend the Minister of Agriculture, Fisheries and Food, the Commission report took a long time to appear, but when it did it confirmed that there were serious distortions both in inspection levels and in charging practices which, in the Commission's view, were sufficiently serious to require further harmonisation measures. After some further delays, the Commission produced in April this year the proposals contained in the document before us tonight.
Before dealing with these proposals in detail, I wish to express my sympathy for the position in which the industry now finds itself as a result of these distortions in the implementation of the directive. It is not the main factor that has contributed to the present difficult trading conditions, but it is one element. The Government have recognised the need to help by making available £2 million towards the costs of poultrymeat inspection in 1980–81, and we shall continue to try to achieve uniform application of the directive in Brussels. We have already given an assurance that we shall adjust arrangements here to whatever turn out to be the agreed levels in the Community; and I repeat that assurance now. We are also determined to ensure that whatever is agreed is realistic and that it is genuinely applied in all member States. We shall be seeking agreement that for this purpose the Commission should make regular visits to each member State to check on the measures which are being applied.
I shall comment briefly on the four main proposals in the Commission document.

Mr. Tony Marlow: Is my hon. Friend suggesting that at that stage we shall have the bureaucrats of the Commission creeping round our slaughterhouses seeing what we are doing?

Mr. Wiggin: I thought that I had made it abundantly clear that we sought the assurance of the Commission that in implementing such regulations it should see that such regulations are being carried out in all member States.
I was commenting on the four main proposals in the Commission document—veterinary attendance in poultry slaughterhouses, inspection rates expressed in numbers of carcases per inspector per hour, charging arrangements and the extension of the derogation allowing the production of uneviscerated poultry in licensed slaughterhouses. First, I appreciate that the Commission's proposal for full-time veterinary attendance in all but the very smallest of slaughterhouses is one to which the industry and the local authority associations are particularly opposed. I understand the view that that is excessive. We consider that a sliding scale of attendance included in our existing guidance to local authorities under which full-time attendance is recommended in only the largest slaughterhouses—and the average is more like 50 per cent. Attendance—is about right. We shall, therefore, be resisting the Commission's proposal on that.
Second, the Commission has proposed that the maximum number of broilers which can be inspected per hour by each inspector should be 1,200, while for hens, turkeys, geese and ducks it has proposed 600. In other words, the Commission is saying that it takes three seconds to carry out an adequate inspection of a broiler and correspondingly longer for larger or older birds. Here again, I appreciate that the industry and the local authority associations believe that one inspector can inspect more carcases in one hour than the Commission suggests. I


apologise for having gone into such detail, but I know that a number of hon. Members are concerned about those details. My technical advice is that three seconds per broiler is about right, given the need to inspect both the outside, inside and visceral mass of each carcase and that the figures for the other species are about right also, except that for ducks, where rather faster rates of inspection are possible.
In discussing this subject in Brussels, we shall be especially mindful of the need for regular Commission supervision of whatever turns out to be the agreed level of inspection and we shall not give our agreement to any figures unless we are satisfied that they will be adequately policed. One idea which has already been advanced in Brussels and which in our view merits further examination is that such inspection levels might be obligatory only for poultrymeat which is eligible for intra-Community trade. However, there is also considerable opposition to this idea among some member States and it is too early to say how the discussion might develop.
Third, on charging, the Commission proposal is that there should be no subsidy from public funds and that the full cost of inspection should be charged to the product at a standard rate. We are in agreement with the part of the proposal which rules out subsidies. Successive Governments in this country have, rightly in my view, considered that the costs of meat inspection, whether for red meat or poultry meat, are part of the costs of production and should therefore be charged to the product. Some other Governments in the Community have not taken that view up to now. We have, however, some doubts about the Commission proposal for a standard rate charge. The Commission have explained that it intends that charges within countries should be at a standard rate, but that there need not be a standardisation between countries. We do not see much point in this aspect of the proposal, bearing in mind the practical problems of calculating and collecting a standard charge.
The fourth Commission proposal is for a five-year extension of the derogation permitting the production of uneviscerated poultry in licensed slaughterhouses. At present, that is due to end on 15 August this year and the Commission proposal would extend the date to 15 August 1986. The proposal is of greater relevance to some other member States than it is to the United Kingdom, but it is of importance to those licensed slaughterhouses in this country which still produce New York dressed poultry. As it is clear that no decision on a five-year extension can be taken by 15 August this year, the Commission has now proposed a one-year extension pending a definitive decision later. The Council of Ministers in Brussels is due to discuss this proposal tomorrow. The Government have alerted all the local authorities concerned to the situation and, whether the Council takes a decision on this matter this week or after the summer, we think that all local authorities are now aware of the need not to take action which might place processors of New York dressed poultry in this country at a disadvantage compared with their equivalents in other member States.
I hope that it will be helpful to the House to have heard in some detail how we plan to tackle the main Commission proposals. It is already clear from discussions at official level in the Council working party that there are wide differences of opinion on most of these issues among the

various delegations. Early decisions are, therefore, unlikely, although we shall continue during our Presidency to press for agreement.
The Government are very well aware that time is short domestically, particularly as the cost equalisation scheme run by the British Poultry Federation is due to end on 31 August this year. We have, therefore, been considering urgently with the federation, the local authority associations and other interested organisations whether, in advance of Community decisions, some means can he found of enabling the poultry, meat inspection service to be provided, within the context of the existing regulations, at a lower cost to the industry while maintaining the essential safeguards which the service provides to consumers of poultry meat. These discussions have not yet been completed and I am not in a position to say more today, but I hope that it will be possible to make an announcement on this subject in the near future.

Mr. Gavin Strang: Hon. Members who have followed these matters will recall the tortuous arguments that preceded the implementation of the present arrangements for the inspection of poultrymeat. The Parliamentary Secretary participated in the debates. The present arrangements for the implementation of the provisions led to an improvement in standards of hygiene in the processing of poultrymeat. All the interested parties, the veterinary surgeons, environmental health officers, poultrymeat inspectors, producers and processing companies played their part in achieving a real improvement in standards. The main improvement came from new investment in more modern and hygienic equipment on the introduction of the regulations.
We must also acknowledge the real tensions that exist, not least between the official veterinary surgeons and the environmental health officers, over the allocation of responsibility for the administration and supervision of poultry processing plants.
Some advance has been made in hygiene standards. We must not forget that that is what the regulations are about. However, some significant problems have arisen as a consequence of the application of the directive throughout the member States. Above all, the problems arise out of the unevenness of its application. According to the official survey, we have been applying the directive more rigorously and effectively than have other member States, with the possible exception of Denmark, and to some extent Germany. Many member States, including our main competitors, have not come anywhere near the standards laid down by the British Government.
There has been a severe disparity in relation to the cost of the inspection service. The Government made a contribution towards the training, and a limited contribution towards the cost of running the service, but in practice the British producer has borne a heavy burden compared with his competitors. The Danish Government for example, have covered the cost of the service. Clearly, we cannot expect our industry to accept that state of affairs, particularly in present circumstances.
There is a dichotomy in the approaches to the problem. I note that the Parliamentary Secretary is not committed to the Commission's amending directive. Indeed, I take it from his remarks that the Government are determined to achieve changes, if not to eliminate the directive—and we may be better off without it. The Commission's approach


is to introduce an element of greater stringency and uniformity across the board, but the Government seem to be saying that there should be increased flexibility and a loosening of requirements in the United Kingdom in relation to the inspection service.
Will the Parliamentary Secretary say more about the proposition that it is widely believed the Government favour, namely, that there should be a change in the uniform requirement, which many welcomed when it was first introduced, that if a poultry processing plant was deemed appropriate for the export trade, it was deemed appropriate for the home trade as well, and vice versa?
There may be some difficulty in moving from the present position, particularly if some major retailers, say Marks and Spencer, were to decide that they wanted to retain the standard applied for the export trade. Our approach should not necessarily be to create a two-tier system in the United Kingdom. Above all, we have to acknowledge that the present situation is unsatisfactory and we cannot expect our industry to labour under the present conditions.
The reason why this has become such a major issue is not so much the disparity in the cost of the service, though that is a significant element in competitiveness, as the overall state of the poultry industry. We cannot discuss the Commission's proposal in isolation from the decimation of the British industry. I hope that the Minister can give us some facts about the decline that is taking place. Is it true that 5,000 of the 25,000 jobs of those directly employed in the industry have already been lost? We know of the major closures, and many other plants are running at a loss and only just surviving. They want some changes in the inspection service, and they want the Government to meet the total cost of the service, at least temporarily, but the gut issue is the unrealistic competition that our industry has to put up with.
This sector, more than any other, brings out the extent to which we are getting the worst of all worlds from the CAP. On the one hand, we bear a disproportionate share of the cost of the CAP across the board, but on the other the French Government are pouring money into their industry and deliberately setting about establishing a large market share in the United Kingdom. No one can dispute that. The facts have been exposed by the British Poultry Federation, the NFU and others.
It is not possible to have a debate on the narrow lines that the Minister has set without considering the crisis that exists in the poultry industry. Our approach to the directive should be: what can we do urgently in the short-term to shore up our industry? That sounds rather negative and defensive, but it is a reflection of the depth of the crisis. First, we must help with inspection costs. I do not disagree with the hon. Gentleman's observation that, as a principle, Government would be reluctant to bear the total cost of the inspection of red and white meat. I should not make an issue of that.
In the present climate, we should not debate such principles, but should look at the matter from a pragmatic point of view. The industry is in a state of crisis, and assisting with inspection costs is one immediate way in which we can help the industry. Rather than spending a lot of time arguing about modest changes to this amending directive—there is much cynicism and scepticism anyway about whether it will be applied in the other member

States—it would be better if Ministers came forward with a scheme, before Parliament goes into recess, to provide Government money to lift the cost of this service from our producers.
Secondly, Ministers should bring forward a scheme to provide production aids for our industry. There is no alternative to that in the short term. The Government should tell the French and the Commission that they are not prepared to abdicate responsibility for this important industry—and in my view it is an important industry.

Mr. Hugh Dykes: We are, of course, in sympathy with what the hon. Gentleman is saying about the need to defend the industry. However, perhaps he is getting the French situation out of perspective, because I know that he is always anxious to attack wicked foreigners if he can. Is it not, rather, that the French are benefiting in the under-developed regions, such as Brittany, from the kind of regional grants system that we have here? There are certain similarities. If the relevant poultry industry were located here in under-developed regions, as opposed, say, to East Anglia and elsewhere, they could benefit from subsidies of the kind that the French are receiving.

Mr. Strang: I am surprised that the hon. Member should accuse me of attacking wicked foreigners. Most people who have followed what I have said in these debates over the years would not make that charge against me. One cannot dismiss the matter by saying that the French are locating these plants in areas where regional funds are payable and that it can simply be accounted for in that way. When one examines the scale of the support, which is selective and sectoral—it is in Brittany, but it is not applied across the board to all industry—and when one examines the volume of the concessions and the amount of public money that is being spent in various forms, one sees that it constitutes wholly unacceptable competition.
We should treat our industry in the way that the French would treat their industry if it were in a similar position to ours and make it clear that either they remove the unfair aids, or we limit their access to the British market.

Sir Paul Bryan: Would the hon. Gentleman be right in saying that a single plant which has been put up in Brittany, and which has been heavily subsidised, will have the capacity to produce as many turkeys as the whole British turkey industry?

Mr. Strang: The hon. Member is right. It is certainly of that order of magnitude. That is the example that has been most frequently cited in the agricultural press. This is a question not just of regional policy but of a sustained policy by the French Government, aimed at supporting and encouraging a massive expansion of the industry, which has already taken place, and which will take place to an even greater extent.
The history of the Community is such that we can forget about the Treaty of Rome and about free competition. When it comes to vital national interests, in practice member Governments seek to protect them. We are talking about a vital national interest here, and the Government do no one a favour by refusing to take action.
We can argue as much as we like about the narrow technical details of the inspection service implicit in the directive, but all the pressure being devoted to this matter stems basically from that unacceptable attitude. I hope that the Minister will address himself to these major issues of concern to the industry.

Mr. Peter Mills: It is not often that I agree with the hon. Member for Edinburgh, East (Mr. Strang), but I agree with one of his comments about the directive. We have to look behind the directive and try to see what is happening in the industry. It is no exaggeration to say that a crisis has developed, not only in the poultrymeat section but in eggs as well.
There has been a real loss of confidence. Of course, the industry has had its problems before. It is an industry which has received the least amount of subsidy for many years; but it cannot weather the present storm, and it has lost confidence.
A great many people have been in touch with me about the problems—probably more than ever before. In my part of the world, in Devon and Cornwall, I have had the chairman of the local branch of the National Farmers Union and various constituents lobbying me. They have shown me their accounts and explained their problems. I find it very difficult to advise them.
The reasons may seem clear to some, but I do not believe that we can blame the Government. As has happened in many other industries, costs have risen, and these health regulations are a burden which add to the costs. There have been diminishing returns to the industry. Production levels are falling. Above all, there are genuine and real fears.
We see the expansion of French production. I do not know whether the House fully appreciates the determination of the French Government to be the food producers of Europe. In my view, it is the wrong way round. We ought to have that determination to be the food producers of Europe and to thrust into Europe with our exports and counter this threat. The industry has this real fear of French production.
There are low-price imports of both eggs and chickens, and, of course, there is more to come, as my hon. Friend the Member for Howden (Sir P. Bryan) implied in his remark about Brittany.
These fears, plus the costs and all the other factors to which I have referred, mean that the industry's confidence has gone. The producers feel a strong sense of unfairness. It is very difficult to prove this unfairness, however, especially about French production and their methods. The belief is that French producers are heavily subsidised. We know that there are national aids, and the industry believes that the French get away with it. We stick by the rules, and they do not. It is very difficult to pin down the French and for the Community to take action on this unfairness.
All this adds to the problems of the producer, but others are worried. There are many jobs at stake. If we lose our poultrymeat industry, thousands of jobs will disappear. The animal feed trade and our meat plants and slaughter plants which specialise in poultrymeat production will be affected. Many others besides the producers are fearful of the future and have lost confidence. This is a serious time with serious problems. In the long run the consumer will suffer. It will be a sad day if the consumer has to rely on imports of French or any other Continental poultrymeat for his table. The industry needs to have its confidence restored.
What can be done? It is difficult to know exactly what action can be taken. The hon. Member for Edinburgh, East has made one or two suggestions the implementation of which would be fairly costly. However something will

have to be done. The trade is saying to me "All right, Peter Mills, you have made all these excuses about what the Government are trying to do. You have told us about how they have taken the issue to Brussels and all the rest of it. But does the Ministry want a turkey and poultry industry in future?" I know that it does. That being so, action has to be taken fairly quickly. A point of no return is rapidly developing. It would be a tragedy to let the industry wilt away. We have an assurance—

Mr. Deputy Speaker: (Mr. Bryant Godman Irvine): Order. I draw the attention of the hon. Member for Devon. West (Mr. Mills) to the fact that we are debating the subject of poultry hygiene and inspection.

Mr. Mills: That is exactly what I am doing, Mr. Deputy Speaker. The directive represents one more burden and one more difficulty for the industry to face. It is another measure that will add to the loss of confidence. It is plain that this measure will add to the industry's burdens. This is a crisis. The Minister has, I am sure, taken into account the effect of the directive. He has said that he appreciates the problems of the industry and has confirmed his determination to ensure that it is not destroyed by unfair competition from abroad.

Mr. Deputy Speaker: The hon. Gentleman may have a good argument to develop on another occasion. He must now confine himself to inspection.

Mr. Mills: I hate to disagree with you, Mr. Deputy Speaker. May I explain why I do so? The Minister said that he appreciates the problems of the industry. The directive is a problem for the industry.

Mr. Deputy Speaker: Order. That is the problem that we are debating. We are not debating other problems.

Mr. Mills: I am trying to emphasise that the problem that we are debating is adding to the burdens that the industry is experiencing.

Mr. Geoffrey Johnson Smith: Is my hon. Friend saying that the burdens that the industry already has placed upon it put it in serious jeopardy and that the directive before us will push it over the brink and put the United Kingdom out of the industry altogether?

Mr. Mills: My hon. Friend is right. That is what I am trying to say. He has put the argument in a different way and in a different form. He is not Peter Mills and he speaks in another way.
I turn to the regulations. The latest proposals from the Commission will do nothing to restore the confidence that the industry requires. I reject the document. I hope that the Minister will deal with it savagely in Brussels. It is not what is needed. It is not what is wanted for the industry with one exception—namely, the proposal to allow New York dressed birds to continue. I have lived in Devon all my life. I have eaten New York dressed birds virtually all my life. I have never suffered anything from a bird dressed in that form. An extension of that derogation is very important.
The British Poultry Federation Limited states, first,
That domestic product can in future be inspected according to national traditions, provided all the objectives and standards are met.
Secondly, it states
That export product must be processed to standards agreed at Community level, and rigidly enforced. We believe that the only effective sanction is to ban product which has not followed the agreed criteria.


I tend to agree with that.
The NFU is not happy about it. It does not like the two-tier system. I wonder why. We have a two-tier system in various animal slaughtering—beef, lamb and so on. We have export standards and we have home standards. I do not know why, to help the industry in its present troubles and difficulties, the Minister should not bring in the two-tier system. I recommend it. I believe that in the present situation it would be the best way forward.
I apologise if I have been difficult, Mr. Deputy Speaker, but I hope you see that there is much more behind the proposals that we are discussing tonight than is immediately apparant. There is a serious loss of confidence. I believe that the Minister wants the turkey and poultry industry to continue. All I would say to him now—as I have said to him personally—is that, if he wants it to continue, we have to do something about it quickly.

Mr. Bill Walker: I welcome the opportunity to speak in the debate because of my constituency interest. I have a poultry processing plant at Coupar Angus. It is a substantial employer in an area that has already been adversely affected by the closures of a canning factory and three textile mills. One does not have to be terribly clever to realise that some of the closures have been brought about by the changing pattern of European trade, and there is deep concern in my constituency about the way things are going.
The directive that we are debating is of great concern to my constituents, because they see the way that British membership of the EEC has affected others around them. They note that we have suffered because of the way in which directives are applied by other member States, to the extent that it has adversely affected the people working in the two industries that I mentioned.
The British poultry industry is one which has been affected not only by the recession but by the distortions at the inspection level and in the charging practices operated by other member States. Consequently, we face subsidised imports from abroad, and this is damaging to our poultry processors.
From the comments made by the Minister earlier this evening, I trust that the original EEC hygiene directive is now up for amendment. I hope that he will confirm that that is what he was saying.
The poultry industry was right to draw hon. Members' attention to the situation that it saw. Uneconomic hygienic costs is only one adverse factor, but that is what we are debating this evening. My hon. Friend the Member for Devon, West (Mr. Mills) was rightly brought to order because he was widening the debate, but the industry is terribly worried, because this additional cost burden could be the difference between survival and going out of business.
It is time that we looked after this British industry and acknowledged that the French have not been behaving correctly. They have not been applying the existing EEC directive. Can we genuinely believe that, whatever amendments are agreed, the French will apply them? They have already invested heavily in plants and will wish to see them prosper, and they can do so only if they substantially penetrate the British market.
I do not often agree with the Opposition Front Bench, and I rarely agree with the hon. Member for Edinburgh, East (Mr. Strang), but much of what he said this evening I would have wished to have said myself. He confirmed the views expressed to me by the management, trade unions and others in the poultry processing plant in my constituency.
In these difficult times, Government aid to help with the cost of inspections and other burdens would be welcome, but the industry wants fair competition, particularly in our own and EEC markets. More importantly, it needs a stable home market. We look to the Government to ensure that our industry continues to have that.

Mr. Austin Mitchell: It is interesting to listen to Conservative Members. They are essentially saying that, if we enforce the regulations, they will prove to be unnecessary, as the industry will have gone bankrupt because they have been enforced. It is the usual spectacle of the party of Euro-enthusiasts praising the Common Market generally, although on every specific issue they lament its disastrous effects on industries and other activities in their constituencies. They praise the general and attack the particular. These regulations are not only pointless and unnecessary; they are an inevitable consequence of our membership of the Market that we agreed to enter in 1972.
Grimsby may not be recognised as a centre for the Chicken-Licken Turkey-Lurkey and Ducky-Kucky industry, but I, too, have received representations, particularly from Cherry Valley Farms, which employs an unfortunately reduced number of my constituents. It feels that the provision for veterinary inspection place an unnecessary burden on the industry.
Most hon. Members will have received similar representations from the British Poultry Federation Ltd., which states that
the whole of the British poultry industry … asks you to reject the proposals in the latest Commission document root and branch with the exception of the derogation proposed for New York Dressed Production. We see this document as totally disastrous, and irrelevant to our requirements.
That puts this document in its proper light. We face a proposal that has already increased costs. Estimates of the increase vary, but for efficient producers it must be about 1½p per bird and for less efficient producers up to 20p.
In agreeing to assist phasing in the system to the extent of £2 million in 1980–81, the Government acknowledge that the burden of costs on the industry is considerable. Those costs, are being imposed on an industry that is in an extremely difficult competitive situation, largely due, as hon. Gentlemen point out, to unfair competition from the market that they adore.
Although standards have been improved, it has been largely the result of better equipment, much of it imported. The cost burden of the new inspection system is too heavy for an industry in a difficult situation. It is, therefore, appropriate that the burden should be borne, not as the directive says, but by the Government, as happens in Denmark and in other competitor countries. Our policy has been to push our standards ahead of those in other European countries and then to argue that we should resile from them or let others catch up. That policy has placed our industry in an exposed position.
Here, as all too often, we find ourselves obeying the full strictness and interpretation of the law and establishing


practices ahead of other Common Market countries. We treat matters seriously, and so incur costs and other disadvantages which impose a burden on our industries. As a result, their industries steal our markets, partly because they are less scrupulous in the observance of the rules than we are. It is a classic Common Market story which is now affecting this industry.
All this points not to this directive—our previous provisions were, after all, satisfactory—but to applying the veterinary inspection system only to the export trade and taking powers to control imports to see whether proper inspections have been applied to imported chickens, turkeys and ducklings.
This is a directive, not a regulation, so it is enforced more subjectively. By that very fact, it will encourage the very divergence of practice that we are anxious to avoid. Unfortunately, in pursuing uniform standards, the Government are pursuing a mirage and at the same time damaging our own industry.

Mr. Nigel Spearing: My hon. Friend mentioned that this was a directive, not a regulation. If the Minister does not achieve what his hon. Friends seeks, surely it will be possible not to implement the directive by not approving the orders that he may have to lay before the House. They would then be doing what many of us believe that the House will eventually have to do, which is to stand up against the Commission operating an unfair system.

Mr. Mitchell: My hon. Friend is right. I hope that in the last analysis they will stand up and be counted, instead of mouthing vague protests and then doing nothing about it.
In my view, we should withdraw the guidelines for the domestic industry, apply the regulations only for exports and ensure that they are enforced for imported produce. It is unreasonable to impose mechanical standards designed by Euro-bureaucrats, as the Minister suggested, timing turkeys and chickens as they pass through.
This brings us, as it were, to the parson's nose of Euro-folly. Perhaps the Minister will tell us, incidentally, what we are supposed to make of the passage in the amended directive 71/118, which reads:
Whereas a procedure ensuring close co-operation between the Member States and the Commission should be set up for taking decisions relating in particular to the changes of the maximum number of birds which may be inspected in one hour by one veterinarian or by one assistant.
To me, that is a Euro-gobbledegook passage in a largely Euro-gobbledegook directive.
The industry is in an extremely difficult competitive situation. It is faced with unfair and uncontrolled competition, largely from France. The Government should heed the voice of the industry and speak with that voice to the Common Market, instead of speaking, as they have hitherto, with one voice to the industry and another to Europe. They should speak for the industry and try to help it in this difficult situation, rather than sit on the fence as they have done so far.

Mr. Charles Morrison: As you have rightly and properly reminded us, Mr. Deputy Speaker, we are discussing health problems affecting trade in fresh poultry meat. Indirectly, therefore, we are talking about the future of the United Kingdom poultry industry. The two matters

are indivisible because of the costs involved. Indeed, the National Farmers Union has estimated that there are 100,000 jobs in this industry, if one includes the production, packing and processing of poultry. The amending regulations before us tonight are therefore of considerable importance not only to poultry production but also to employment in this country.
As my hon. Friend the Member for Devon, West (Mr. Mills) has reminded the House, the poultry industry is suffering a severe loss of confidence. Like my hon. Friend, I have been inundated with representations and letters from my constituency expressing fears for the future of the industry because of what is thought to be unfair competition from other member States of the Community. There is no question at the moment of any expansion in the industry. Indeed, all the statistics show that it is contracting sharply and that a number of poultry producers and processors are in considerable difficulty.
I am a strong supporter of our continuing membership of the European Community—

Mr. Austin Mitchell: But.

Mr. Morrison: —and I consider that any other possibility is beyond belief and totally impractical. Furthermore, I am a strong supporter of sensible poultry hygiene regulations—

Mr. Mitchell: But.

Mr. Morrison: —and I am in favour of harmonisation.

Mr. Mitchell: But.

Mr. Morrison: The hon. Gentleman is a fraction ahead of me. Harmonisation must be real harmonisation on a totally equal basis throughout the Community. The hon. Gentleman, who has been interrupting me, implies that he has been rather clever. The truth is that this brief debate takes place because, as the explanatory memorandum states,
A study of the practical application of this Directive undertaken by the Commission during 1979–80 revealed differences both in levels of inspection and methods of charging in Member States sufficiently great to necessitate further harmonisation.
It is therefore clear that the Commission itself appreciates that there has not been harmonisation and that there should be harmonisation in the future.
I thought that the Minister's speech was encouraging. It voiced some, if not all, of the reservations about the proposals that I happen to feel. I was also encouraged to hear my hon. Friend say that early decisions are unlikely. That is excellent. It means that the Government are determined to ensure that before the revised regulations come into force there should be proper arrangements to ensure that this time there will be harmonisation. In that regard, I take the view that it is important to ensure that there should be adequate policing of the arrangements in all the member States of the Community.
I have been in correspondence with the Minister about unfair competition. I have been encouraged by his response. My hon. Friend tells me that he has sent the Commission a substantial dossier of the aids that he understands are available in particular to French poultry producers with a request that the Commission should determine whether such aids are compatible with Community rules on State aids. I should, therefore, like to encourage the Government in their efforts to chivvy the


Commission to take steps to secure the control of the abuse of regulations or competition by any Community country. I rely on the Government's determination to agree only to poultrymeat hygiene amending regulations that will insist on equality of treatment, in the widest sense, throughout the Community.

Mr. Eldon Griffiths: I am sure that the Minister has got the point that hon. Members are virtually unanimous in asking him to take the directive back and to wring its neck. That is the best thing to do.
My constituency, like that of my hon. Friend the Member for Sudbury and Woodbridge (Mr. Stainton), is full of chickens, ducks, geese and turkeys. Long may it remain so! However, I have grave doubts about whether that population of feathered creatures will remain so strong if anybody—the EEC, the Government, or urban people, who constantly add to our costs—continues to add to the industry's burdens. The Minister was right to start by underlining the fact that directive 71/118 is the only Community directive that seeks to regulate domestic as well as infra-European trade. That is why it is particularly important to have a detailed debate.
I have only four points to make on the Minister's speech. As regards the attendance of vets, the EEC has never understood the virtue of the old English system of public health inspectors, who are now known as environmental health inspectors. It was wrong of the vets unions to join together to squeeze the public health inspectors out of the inspection business. They did a good job and should have been allowed to continue to do so. They were cheaper, much more practical and knew their business. The suggestion that there should be one vet in every egg-packing or chicken-processing plant in the country is absurd.
I agree with my hon. Friend the Minister that our sliding scale is better, but I should be inclined to go even further and suggest that it is sufficient for public health inspectors or environmental health inspectors to form their own judgments. They live in the country and know what they are doing. They know when it is necessary to attend, without needing regulations from Brussels or anywhere else.
I turn to the subject of the inspection of carcases per hour. It is absurd that we and the other Parliaments of the Community should debate whether three or four seconds per bird is needed. Is it to be three seconds if it is a broiler, four seconds for a duck and five should the bird happen to be a goose? That is preposterous. Anyone who has seen a poultry production line will know that even the most highly paid vet in the world will become cross-eyed if he tries to look at every bird going by. There is not a man alive who will spend three seconds on every broiler and four seconds on every duck. That does not happen and it would be absurd to write such detail into any form of international law.
The Minister mentioned the charging rates. The local authorities and industry in my part of the country are at one in believing the charges to be far too high. If we had had a more sensible system, with environmental health inspectors making their own judgments on random

samplings, the charges could have remained lower. It must be borne in mind that environmental health inspectors have to bear the responsibility if they do not do the job properly.
On the question of the five-year derogation of New York dressed poultry, like my hon. Friend the Member for Devon, West (Mr. Mills), I was brought up on un-eviscerated birds. I have never understood why they were called New York dressed. I hope that I can continue to eat them, because I am old-fashioned enough to think that the flavour is better. Whether it is, where there is a decent system of local public health inspectors, they know what it is necessary to inspect.
All of this extra complication brings the Common Market into disrepute. I am a supporter of British membership. I hope that the Minister will be strengthened by the debate to return to his colleagues in the European Community. He should tell them that if there is one way of putting at risk the loyalty to the European Community that the vast majority of Conservatives have, it is to introduce directives such as this, which are irrelevant to the countryside and do no good for the hygiene standards that they seek to promote.

Mr. Colin Shepherd: One of the things that I find when looking round my constituency and examining the businesses of my major employers is that the more I examine them the more interested I become in what they are doing. I have a major producer of poultrymeat in my constituency, Sun Valley. It fills me with pleasure to see so many colleagues here this evening from constituencies in which Sun Valley has subsidiary plants. That is indicative of the interest that is taken on a wider front in the affairs of Sun Valley and the poultry industry generally by Conservative Members, even if not by the Opposition.
One is inclined to think of poultry producers' premises as being small sheds or houses. Nothing could be further from the truth. Today the poultry industry is a large, vertically integrated industry which involves not just the growing of birds but their processing,, the growing of feed for the birds and the further value added to birds by selling cooked meats, prepared dishes, Tandoori this, fried chicken that and so on. That is a major fact for hon. Members to bear in mind when considering the structure of the poultry industry.
We are considering suggested amendments to the poultrymeat hygiene regulations, which have given rise to an immense amount of stress to the industry since they were introduced in 1979. We are also considering the draft proposals for the improvement of those inspection regulations.
The proposals do not fill me with much confidence. Basically they are not a happy set of draft proposals, with one exception. That is the proposal mentioned by my hon. Friend the Member for Devon, West (Mr. Mills), backed up by my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) about New York dressed poultry. I can see no reason for not having derogation in perpetuity for NYD. Let us not mess about with a further five years here or one year there. Let us take that out of the ball park and get on with the mass-produced business, not the New York dressed which is small-scale, farm gate sales stuff.
We are not happy with the present regulations. We see differences arising about enforcement. That was adequately drawn—or dragged—out of the Commission by the survey that was carried out and published many


months later after much procrastination. There is no such thing as parity of enforcement of the regulations within the Community.
We have seen no parity either in the costs of the regulations. Denmark carries the entire cost of poultrymeat inspection. We have been forced into having to bail out the industry by the welcome addition of £2 million on a fifty-fifty basis with the industry. That is much appreciated. The French run two systems. They have the effilé system for internal use, which means that the full costs of inspection are not borne by the broiler fowl industry. The extra margin from that can go towards assisting the export business or the development of new business. These are important factors.
Problems are also experienced in the United Kingdom by the operation of the British Poultry Federation's equalisation scheme. It has given rise to stresses in the industry, although broadly it was welcomed as a fine initiative by an industry under great stress.
We must examine a two-tier structure. As an interim measure we must get away from what we have on the table in front of us. We must lean towards an interim measure until the question can be resolved properly in the light of experience and the development of markets. I stress the importance of having an interim measure.
Veterinary inspection is more onerous. If we are happy about the present enforcement, why should the next provision be more rigorous? Why should we be confident that veterinary inspection will be enforced in the French and Dutch plants when we have no reason to believe that it is enforced at present? I am open to being shot down on that. I should welcome it, but I do not think that it is possible.
There is a massive disagreement between the Commission and the industry about possible inspection rates. The issue was put in its proper perspective by my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths), who poured derision on cross-eyed inspectors trying hard to keep pace with the fast flowing line of birds. I have watched them and it is as hypnotic as watching cider being bottled down the road from Sun Valley.
We like the thought that no Government subsidies will be given towards the cost of inspection. We like the concept of the full cost of inspection being charged to the product at a standard rate. However, we do not know how monitoring is to take place. How do we know that it will happen? It is important that confidence is instilled. My hon. Friend the Member for Devon, West referred to that.
The British Poultry Federation's equalisation scheme is due to finish at the end of August. That threatens to drive a wedge through the poultry industry. We should recognise that that is inherent in the present position. The equalisation scheme was designed to spread the cost of inspection across the industry. It helped the small producer. However, it produced a major strain on the larger producer.
If the equalisation scheme were removed and we returned to the position before its introduction, the bigger producers such as Sun Valley would be able to charge about 5p per lb. less on their poultry meat. At the end of the inspection system it will cost only ½p. With that 5p per lb. premium such companies would be in a position to expert and to compete against imports which are quoted as their price less 6p.
Big industry could compete with big industry in France. We have to make up our minds about whether we want an

industry which is balanced between big and small, and make our arrangements accordingly. We cannot have it both ways. If we want a big industry that can compete, the small industry will be unable to compete. Perhaps the industry must take that on board and debate agressively within its own framework.
We are trying to have it all ways. We are trying to protect a morass of small producers who do a super job, at the same time as trying to make it possible for the bigger producers, which are incredibly efficient, to compete effectively with the threat from across the water. It is clear that if we do not indulge in equalisation schemes the big industry can and will compete. We must therefore have a clear idea of the future structure of the industry when deciding on the course we take.
I shall conclude with a plea for a major "Buy British" campaign in this country. We can do it. The industry can get together and put its mark on its produce within the two-tier structure. It can say "This is a British bird inspected to British standards. Buy British and eat a British bird". I do not want to coin the slogans. The industry can do that far better than I. But it would like to know from the Minister whether it will be able confidently to mark British birds with a British mark, and whether there is any legal objection to that—I am thinking of the French effilé mark.
There are problems ahead—I have tried to explain how they relate to the structure of the industry—in terms of inspection. There are rumours that the French are pouring still more resources into a massive broiler fowl production plant to produce birds for third country consumption. That will put a lot of poultrymeat on the world market, and that is bound to affect our home market. It is therefore essential that we do not indulge in unnecessary high-cost inspection methods. We shall then be able to compete with the threat when it came.
Above all, the industry—to return to the subject of confidence referred to by my hon. Friend the Member for Devon, West—needs to know the form. It is undoubtedly resilient and is determined to remain so. It does not want to be buoyed up with false hopes. It wants to know where it stands. It does not want to indulge in wishful thinking that M. Bourgoin might go broke. We know that he will not go broke but will be propped up by the French Government, because that is the structure of the deal—although not officially. Our debate tonight underlines this important confidence-essential.

11.28

Mr. Bob Cryer: I shall be brief, and I apologise for having missed the Minister's speech. I have questions to put, because a number of my constituents work in a large poultry packing plant. I hope that the Minister can answer them.
The British Poultry Federation lobbied Parliament several months ago to raise the problem of unequal charging. Doubtless, hon. Members from both sides of the House attended that lobby. It was a serious issue at that time.
In the explanatory memorandum 5704/81 the Government say that they will be
discussing these proposals with the objective of securing realistic arrangements which all Member States will undertake to apply".


I should be grateful if the Minister could explain which "realistic arrangements" of application he has in mind, and, most important, how long he envisages it will take to get these arrangements into operation.
The poultrymeat industry is undergoing severe competition, particularly from French imports, and there is clearly a time limit up to which the British industry can tolerate unfair competition under which the costs of inspection abroad are not fully met by the industry, contrary to what happens here. It is only a matter of time before serious harm is done to our industry.

Mr. Colin Shepherd: Is it not the threat rather than the actuality of imports that is causing concern?

Mr. Cryer: I must tell the hon. Gentleman that when I met representatives of the poultry industry they said that in the wholesale catering sector there were already considerable amounts of imported meat that were affecting them. They were much concerned about the retail side, too.
I ask the Minister to say what time scale the Government have in mind. It is a matter of considerable urgency, and I hope that he will be able to assure the House that he will act with speed.
If the Minister cannot achieve the time scale that he wants, and if he cannot achieve the position that he seeks, is he prepared to recommend, as has been suggested, that any subordinate legislation that he is required to bring in under EEC directives should be put before the House with a recommendation that it be rejected? If he is prepared to take that attitude, he must recognise that it will be a card up his sleeve and may well encourage proper negotiations, with a limited time scale, resulting in realistic arrangements that can be brought into effect quickly and ensure that there is proper competition, without hidden or direct subsidies that form unfair competitio for the British industry.

Mr. David Myles: It should be generally understood in the House that there has never been an EEC regulation for poultrymeat products, as there is for most agricultural products. The poultry industry, like the horticulture industry, has had to rely on the concept of a common market, with harmonisation of State aids, hygiene regulations and so on, so that there would not be unfair competition between member States. Poultry products have never, as far as I know, been subject to MCAs or market support mechanisms, such as we have had for beef, sheepmeat or, to a lesser extent, pigmeat.
The documents being discussed tonight are mainly about the harmonisation of hygiene regulations and, while we have an industry that is as efficient as any in Europe, and one that maintains hygiene standards that are higher than most other States, all sectors of the British poultry industry have been facing a critical situation in the last few months.
In the United Kingdom, £1·5 million was paid to assist in phasing in all the inspection services required as a result of directive 71/118. In January my right hon. Friend the Minister of Agriculture, Fisheries and Food announced a further £2 million subsidy towards inspection costs. This represents about 50 per cent. of the total costs of inspection. Other member States have found it necessary

and important for their industries to provide Government funds to a greater extent. This is largely what has created the present problems facing the British poultry industry and led to the likely attack in the coming months on our turkey industry from such plants as that operating in Brittany.
The proposals that veterinary surgeons should be present in slaughterhouses at all times is surely unnecessary. Poultrymeat inspectors are capable of performing the necessary duties and vets should be employed on a consultancy basis only, or for random checks.
Turning to the second propoal, the British Poultry Federation's costs equalisation scheme comes to an end next month. This has helped small slaughterhouses and is highly commendable. I hope that it can continue after the end of August. The practical problem of collecting a standard charge is such that we should resist this proposal. I was pleased that my hon. Friend the Under-Secretary said so in his speech.
I welcome the proposal to extend the derogation allowing the production of un-viscerated poultry, New York dressed or long-legged, or any other euphemism, in licensed slaughterhouses. I have such a poultry slaughterhouse in my constituency which does a substantial trade in those birds.

Mr. Kenneth Carlisle: My hon. Friend is very articulate about inspection. Does he agree that the whole context of the poultry industry and the great difficulties that it is facing far and away override any of the matters connected with inspection, and that what the Government have to do is tackle the basic problem of the industry?

Mr. Myles: I welcome my hon. Friend's intervention and the fact that he has been able to get into the debate. Currently, Dutch and French imported chickens are selling at 6p a pound below our market prices. By 1977 the British poultry industry had developed quite an export trade of 4 per cent. of production. In 1981 it is expected that the industry will be fortunate if it can keep 90 per cent. of our own market. I urge that something be done to rectify the situation.

Mr. Wiggin: The hon. Member for Edinburgh, East (Mr. Strang) assumed a welcome, agreed on both sides of the House, to the basic criticism of this Community document. I am grateful to him for that. He made the important point, which perhaps escaped one or two other hon. Members, that the question of poultrymeat hygiene is not exclusively one for the Community, but is a matter of considerable domestic importance to make certain that we have high standards in our poultry slaughterhouses. but if these standards are unreasonably high, so are the costs, and that really is the nub of the complaint of the industry.
I should perhaps go into slightly greater detail about what we have in mind in modifying existing arrangements in this country. I emphasise that no decisions have yet been taken and that we still await comments from several important organisations. However, I can confirm that we are thinking of drawing a distinction between establishments which wish to use the Community health mark on some or all of their production and those which do not wish to use the health mark at all.
For the first category we would maintain the existing detailed Ministry guidance on numbers of inspectors and on veterinary attendance; for the second we would withdraw the detailed guidance and leave it to the individual local authorities to determine the arrangements necessary to meet their obligations under the regulations to provide inspection of carcases under veterinary supervision.
We believe that in that way it should be possible for the poultrymeat inspection service to be provided within the context of the existing regulations at a lower cost to the industry, while maintaining the essential safeguards which the service provides to the consumers of poultrymeat.
My hon. Friend the Member for Hereford (Mr. Shepherd) raised the question of a British quality mark. I understand that the British Poultry Federation supports the idea for premises not using the EEC health mark. However, there is no provision in the regulations for the use of such a quality mark. That would be a matter for the industry, which will no doubt bear in mind the need to comply with the general provisions of the Trade Descriptions Act and the Food and Drugs Act. We shall complete and issue a revised circular as soon as we are in a position to do so. We hope that this will be during August, but the matter is not entirely in our own hands.
The hon. Member for Edinburgh, East, like many other hon. Members, finished with general comments on the state of the poultry industry. Bearing in mind your strictures, Mr. Deputy Speaker, I shall not go too far down that road, but I should say that we are in close touch with the leaders of the poultry industry in the United Kingdom not only on hygiene questions, but on all the other issues that are causing concern and can distort trade, including the increases in production elsewhere in the Community with the help of substantial national aids.
My hon. Friend the Member for Devon, West (Mr. Mills) quoted my right hon. Friend. He was actually quoting from an NFU press handout, so at least there was no question of bias in this matter. We appreciate the problems and are determined to ensure that the United Kingdom industry is not destroyed by unfair competition from abroad. We have taken these matters up in Brussels and my right hon. Friend the Minister of Agriculture, Fisheries and Food has made it clear that he will continue to press for effective action on them. He intends to use his period as President of the Agriculture Council to stress the need for greater attention to be paid to the whole question of national aid and other practices that can, and do, prevent fair competition.
The hon. Member for Grimsby (Mr. Mitchell) described the directive as pointless and unnecessary, but that seemed to go against what his hon. Friend the Member for Edinburgh, East said about the importance of poultry hygiene. I tried to explain the details of timing in my opening speech.
My hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths), with his usual eloquence, poured much

scorn on the question of timing, and I am conscious of the apparent Gilbert and Sullivan situation of seconds per bird being discussed on the Floor of the House, but if inspection procedures are to be fair and equal some yardsticks have to be laid down. They may be worked out in seconds per bird, but we are really talking about numbers of inspectors on line. There will be the same number in French and Italian factories as in British factories. Such a yardstick has to be used. As my hon. Friend knows, time is money and standards have to be laid down.
My hon. Friend the Member for Hereford (Mr. Shepherd) mentioned New York dressed poultry. He will know that farm production is already exempt from the hygiene regulations for that. I shall bear in mind what he said, and I have no doubt that his comments about a permanent derogation will be read with great interest.
I have dealt with French competition, but it was raised by a number of hon. Members, including my hon. Friends the Members for Perth and East Perthshire (Mr. Walker), for Devizes (Mr. Morrison) and for Banff (Mr. Myles) and by the hon. Member for Keighley (Mr. Cryer). The competition coming from France, particularly in the turkey industry, is not illegal, but the Government are acutely conscious that if industrial subsidies are to be used for the production of what is a semi-factory operation, there will be a distortion not only in the poultry market, but in that for pigs and for other factory types of production.
My right hon. Friend has made it clear that he intends to raise that matter with the Commission as it breaches so blatantly the whole principle of the CAP. He will use his position during our Presidency to make that point firmly.

Question put an agreed to.

Resolved,
That this House takes note of European Community Document No. 5704/81 amending Directive 71/118 concerning hygiene in poultry slaughterhouses and supports Her Majesty's Government's objective of removing inequalities between Member States in the implementation of that Directive.

Orders of the Day — Statutory Instruments, &c.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): May I put together the Questions on the two motions?

Motion made, and Question put forthwith pursuant
Standing Order No. 73A (Standing Committee on Statutory Instruments, &amp;c.):

Orders of the Day — IMMUNITIES AND PRIVILEGES

That the draft Commission for the Conservation of Antarctic Marine Living Resources (Immunities and Privileges) Order 1981, which was laid before this House on 22nd June, be approved.

That the draft European Centre for Medium-range Weather Forecasts (Immunities and Privileges) (Amendment) Order 1981, which was laid before this House on 22nd June, be approved.—[Mr. Le Marchant.]

Question agreed to.

Orders of the Day — Non-contributory Invalidity Pension

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Le Marchant.]

Miss Jo Richardson: This short debate is about discrimination—discrimination, moreover, against women with severe disabilities who have enough to cope with without having to battle against injustice, inequality and bureaucracy in claiming the non-contributory invalidity pension.
That pension was introduced by the previous Labour Government in 1975 for men and single women. To qualify, such persons have to show only that they are unable to do paid work. Married women were put into a different category. They also have to show that they cannot take up paid employment, but, because they are married women, the out-dated view that their first responsibility was the home led the Department of Health and Social Security to the view that they must pass a test to show that they could not look after that home.
Thus, the now notorious household duties test came into being. So difficult, however, did it prove to be to devise such a test that it was two years before the regulations spelling out what the test meant could be submitted to the national insurance advisory committee.
The committee accepted the DHSS's argument that married women regard caring for the home and family as their major occupation, in the same way as other people regard their paid employment. The committee did not take a view on whether the test was equitable or whether it was discriminatory but agreed that a flexible approach to the test should be adopted. So the HNCIP regulations came into force in 1977.
What a mess those regulations proved to be. Apart from the discriminatory aspect, they are hard to understand and complicated to administer. Their very flexibility has produced varying decisions. A woman applying for the pension must fill in a form stating how well she can clean, cook, do washing and shopping. Faced with these questions, many women often do not answer them realistically because their pride and independence make them put a good face on it. Therefore, many do not qualify for the pension.
Following the questionnaire, the DHSS has to have a medical report, usually from the woman's GP. That report must certify that she cannot do paid employment, and assesses her functional capacity to perform a range of movements and activities. The claim is then decided by the national insurance officer and, if it is refused, there is a right of appeal to the national insurance commissioner—but, of course, only on a point of law.
By September 1978, about 43,000 women had successfully claimed the pension, although in nearly 8 per cent. of cases, it was only after the appeal. When one considers that Professor Peter Townsend estimated that there were more than 2 million married women with some appreciable or severe incapacity, including nearly 200,000 under the age of 60, one sees what a tiny proportion have claimed and been successful.
I hope that the Minister will bring the House up to date tonight about how many such women have successfully claimed during, say, the past 12 months. In some cases when a pension was awarded, the DHSS itself appealed to the national insurance commissioner against the decision

of the local tribunal to award HNCIP. One of those cases was heard in September 1978 by a tribunal of national insurance commissioners. The DHSS argued that, to qualify, a woman
must establish that she is totally incapable, or only minimally capable, of performing household duties.
In that appeal the commissioners, ruling against the DHSS, said that
once it is found that what she is unable to do is substantial…then in our judgment she brings herself fairly and squarely within the terms of the regulations; and it is no longer material to consider what she is able to do, or whether that is also substantial.
What followed this historic and far-reaching decision is now well known. The Department, frightened by the thought that more women would qualify and that that would result in a doubling, or even a trebling, of expenditure on the benefit, amended the regulations four days after the decision was announced—two of those days being a weekend, and Parliament being in recess to boot. If that was not indecent haste, I do not know what is. The amended regulations required a married women to prove that any housework which she could still do was insubstantial.
When the House reassembled after the Summer Recess, two Prayers, signed by over 150 Members of Parliament, were tabled against the amended regulations. To avoid a debate—and a defeat, as I think—the Labour Government decided to refer the interpretation of the household duties test back to MAC. I have no doubt the DHSS Ministers did battle over the financial implications while all this was going on, but the all-powerful Treasury mandarins won the day, and the extra cash was not forthcoming.
The present Secretary of State for Social Services—the then Opposition spokesman—was as angry as Labour Back Benchers. He denounced the Government's handling of the matter as deplorable. He said that it was close to "sharp practice". However, he got two promises from the Government: first, that time would be given for a debate and a vote on whatever came from NIAC; and secondly that no woman already receiving the benefit would lose her benefit before that debate had taken place.
Nineteen months later, in July 1980—almost exactly a year ago—NIAC reported. It accepted the Department's argument that the 1978 amendment regulations had simply restored the original intentions of the household duties test. However, impressed by the huge weight of the evidence which the committee had received, it then stepped outside its brief and proceeded to consider whether a separate test for married women was still jusifiable. It concluded:
It seems to us that, whatever the arguments for applying a special test of this kind to married women in the past, these arguments must inevitably grow weaker in the future as employment outside the home becomes more and more the norm for married women … a test which applies only to married women will begin to seem increasingly inappropriate.
Many of us have recognised for a long time that employment outside the home has been the norm for millions of married women. But we are all pleased that the NIAC acknowledged a change of attitude. The committee considered a number of alternatives and proposed that an alternative test for all NCIP applicants based on an individual claimant's "normal activity" should be applied. But it was quite firm that, if such a test were impracticable, consideration should be given to phasing out the test altogether.
When the then Minister of State announced the publication of the report on 15 July 1980—a year ago—he referred only to the idea of an alternative test—not to the possibility of phasing out the existing one—and he proposed a departmental examination of the NIAC's suggestions.
Where was the promise obtained by the Secretary of State when he was Opposition spokesman in November 1978 for a Commons debate and a vote on the report? It was totally and deliberately forgotten. There has been continual pressure for a debate during the last 12 months, from the Disability Alliance, from the Campaign for Equal Rights for Disabled Women, and from the Labour Back Benches, notably my hon. Friend the Member for Eccles (Mr. Carter-Jones), who has done so much work on this issue, and there has been pressure for the publication of the Department's review. But to no avail. So much for that promise.
The second promise gained by the Secretary of State fell by the wayside almost immediately. The undertaking he obtained that no woman receiving HNCIP would lose her benefit before the Commons had debated the report was broken the very day after the NIAC report was published, when 15 women who had been affected by the amended regulations had their benefit withdrawn.
This has been a very long and sad story, because the people affected are those who, anyway, suffer very much and who have to have that bit of extra courage and determination to cope with daily problems which others take for granted. It is surely not lost on them, too, that this is the International Year of Disabled People, and the extra benefit to which I believe they are all entitled would have been a real way of making life a little easier and would also have contributed meaningfully to the spirit of this international year. Most disabled married women find that the theme of the year has a very hollow ring, I am sorry to say.
Ironically, it is often the most disabled women who fail to get through this humiliating test. Disabled people are very inventive and very practical and want to retain their physical independence. But, with this test, the more a married woman tries to help herself, the less likely it is that she will qualify. In fact, such a woman has to forget her self-respect—which is important to us all but particularly important to those who are handicapped—if she wants successfully to claim HNCIP. If she responds to attempts at rehabilitation by doctors, nurses, therapists and the like, she will find that she is unlikely to pass the test because she has responded to that rehabilitation.
The test has proved shameful and inhumane in itself. But the bureaucratic processes involved make it even more indefensible. It is hard enough for someone who is completely able-bodied to fight her way through a succession of appeals. It is doubly so if she is suffering from some incapacity.
I quote only one case out of many thousands which show how the test works. The woman concerned suffered from chronic bronchitis and hypertension. She could not walk even short distances or climb stairs. She could do no shopping, cooking, heavy cleaning or laundry. She could do only light cleaning and rinse the odd cup and saucer. She received HNCIP from November 1977 until the regulations were amended in September 1978, though only after an appeal. She reapplied for the benefit under the amended regulations and was awarded it some time later. In the meantime she had died. That may seem dramatic,

but it happened. The extra benefit can go to help women to afford extra equipment, for example, to help them, and their families to manage, or perhaps to go towards a home help now that there is a charge because of the public expenditure cuts.
Aside from the humiliation, distress, and even the tragedy, there is the basic discrimination against disabled married women. Many of them have had employment and recent employment, yet they have to prove twice over that they should qualify for benefit. We are living in the 1980s. We are as a society trying to outlaw discrimination wherever we find it. Cost considerations should not stand in the way of simple rights and there would probably, in any event, be some savings, from overlapping benefits.
I do not hold out much hope that the Government will listen to this appeal from disabled married women. What I am saying reflects their views. However, I hope that the Government will at least publish the DHSS review. Let us have a full debate so that we may know the views of the Department. Let us remember that 2 million vulnerable women are involved. We should not turn our backs on them, and particularly not this year.

The Under-Secretary of State for Health and Social Security (Mrs. Lynda Chalker): The hon. Member for Barking (Miss Richardson) is a formidable advocate of the rights of women—married and unmarried—and she has an honourable and consistent record of opposition to the household duties test. She has a right to raise the subject in the way in which she has done tonight—a much greater right, if I may say so, than some of her right hon. and hon. Friends who, to hear them nowadays, cannot have been around when the Government of whom they were members or supporters introduced the household duties test. She knows that the test had a difficult beginning. I have much sympathy with many of her remarks.
The hon. Lady has given a clear explanation of the rules for the non-contributory invalidity pension—I hope that I may now be forgiven for abbreviating it to NCIP—and of the nature of the extra condition, the household duties test, which married women have to satisfy. She has reminded us that NCIP was included in the Social Security Act 1975 and that men and single women started to receive it in the autumn of that year. However, two years passed and it was not until 1977 that the regulations defining normal household duties came into force and the benefit was extended to married women who could satisfy the household duties test.
The hon. Member regards the household duties test, as she has always done, as blatant discrimination against married women. I am not going to argue that point. She is perfectly entitled to say that a qualifying condition that is imposed on married women but not on other groups is discriminatory in the normal sense of the word, regardless of any legal definition.
But without this apparent discrimination, could the previous Government have included married women in their NCIP plans? The White Paper which they published in 1974, entitled "Social Security Provision for the Chronically Sick and Disabled", clearly identified the problems of both groups—housewives who were too disabled to cope with their household work and people who could not get out to work yet had no contribution record. But although their problems were recognised the previous Government tried to leave married women out of


the 1975 Act. Then, when forced to include the married women by Back Bench and Opposition pressure, they added the qualification of the household duties test. It took nearly two more years to prepare the regulations that brought married women into the scheme.
I am not criticising the previous Government. I merely ask that those who criticise the concept of an additional test for housewives whether it would have been possible in practice to bring in married women on the same terms as everyone else or whether it would even have been right to do so, when many of them had made their homes and families their only career, and many of those who had worked had opted out of paying full contributions to cover themselves for sickness benefits.
To be fair to the Labour Government, the introduction of that household duties test was consistent with their White Paper of 1974, which said:
Housewives in this context are essentially married women who do not have paid work and whose normal job is in the home.
It went on to identify as a gap in social security provision as a whole the absence of help for those hosewives whose disablement was such that they had never been able to take unpaid work outside the home or to do their household work.
One thing is certain. It would have been financially impossible to include married women simply on the basis of incapacity for paid work. To have done so then would have brought in nearly 300,000 married women instead of the 40,000 for whom the Labour Government budgeted, and it would have more than doubled the cost of the NCIP scheme as a whole.
The hon. Lady reminded us tonight of what the same Labour Government did a year later, after the Social Security Commissioners had handed down decisions which would have made the household duties test easier to satisfy. They rushed through those amending regulations in record time—in four days over a weekend—because of the financial implications. When the hon. Lady complains about the time that my Department is now taking to carry out the review of the household duties test, I hope that she will reflect on these and other episodes in the history of the test.
When my right hon. Friend the Member for Daventry (Mr. Prentice) announced a year ago that the review would take place, he described the test as having been a controversial one ever since its introduction. The hon. Lady might think that an understatement, but let us look at the record. First, the Labour Government in 1975 tried to duck the issue of a non-contributory benefit for married women. I remember it well. I was a Back-Bench member of the Committee at the time. It took nearly two years to make the regulations. Then, as the hon. Lady said, in 1978 the amending regulations were rushed through because the Social Security Commissioners had interpreted the original ones more leniently than had been expected.
Then belatedly, under great pressure from both sides of the House, the question was referred to the National Insurance Advisory Committee. It then considered the regulations and the test as a whole for 19 months. At the end of that time it did not produce a convincing alternative apart from the suggestion that the test should be phased out altogether over a period. Its main recommendation was that the Department should re-examine the test; in effect,

it was inviting the Department to find an alternative solution to the problem which the committee could not find.
Abolishing the test, whether it was done by stages or not, would eventually cost well over £200 million at current prices, because the result would simply be to extend the NCIP to married women at the same time as men and single women. The unpalatable fact is that much of this would go to women who had been out of the employment field for many years, or who had never regarded themselves as family breadwinners. The advisory committee and other groups have made alternative suggestions, but none has come up with a completely acceptable solution to the problem of fitting married women into a scheme of this kind which is fair to them and to everone else.
I should like to say a few words about the review that is going on at the moment. The problem of how to treat married women fairly is not unique to the United Kingdom. We have been studying what other countries do—something that the NIAC report suggested would be useful. Our correspondence with foreign countries has revealed one or two things which will be of interest to the hon. Lady. Some countries have a benefit which is comparable with HNCIP; others have something similar, but with stricter qualifying conditions or with an element of means testing. Those which have such benefits face problems particularly with assessment. The Finns and the Swedes have both stated that the concept of assessment for incapacity for housework can be difficult and that their procedures had failings. The Danish authorities are in fact, reviewing their own benefit. So I do not believe that there is anything to be gained by presenting the issue as an evil peculiar to this country or to the Government. A sense of perspective shows that it is a problem peculiar to this kind of benefit, and it is one that we have to solve.
It is not surprising, then, that officials in the DHSS are having to make a long and painstaking study of the problem. I hope that we shall find an answer which will be acceptable to all concerned, but I must also sound a warning that any change in the rules which would enjoy general approval would be likely to involve additional cost, and they, of course, we should be faced, as always, with choosing our priorities.
The hon. Lady and other hon. Members press for an early debate. They refer to the fact that my right hon. Friend the Secretary of State, when he was chief Opposition spokesman on the subject, said that we should debate the matter. It is not in my gift to organise a debate, but it strikes me that the present may not be the best moment.
I have heard it said that my ministerial colleagues and I have changed our tune since our criticisms in Opposition of the manner in which the previous Administration amended the regulations. That is ignoring the context of the amendment. After the tribunal of commissioners confirmed the new interpretation of the household duties test, the then Government moved very fast, as has been said.
When the amendments were rushed through the House over the weekend, the normal procedures for referring regulations to the NIAC were ignored. Any responsible Opposition would have been perturbed by such a move. We criticised that method of transacting business and legislating for benefit which can affect thousands of people, and we succeeded in having the regulation referred


to the advisory committee, thus ensuring that the proper authority fully considered the issue. When it reported that the regulations confirmed the original intention of the benefit, our immediate suspicions were allayed. The previous Administration acted hastily perhaps, but not improperly.
However, following the publication of the report, with its wider recommendation, it was suggested that there should be a debate, just as it is now. As I explained, we accept the committee's recommendation to view the test, and I shall make sure that I bring to the attention of my right hon. Friend the Leader of the House the comments of all those who press for a debate. However, I believe that we should wait at least to see the Government's conclusions on the review, which will be the best time for informed discussion.
I have already stated that we are pressing ahead with the review. It will not be completed in time for an announcement before the recess, but I accept the concern of the hon. Lady and others that it should be completed within a reasonable time. My hon. Friend the Minister for Social Security has already promised that the outcome of the review will be brought before the House. I ask the House to accept my assurance that we are treating the matter with as much urgency as is consistent with the need to find a lasting solution.
The hon. Lady also pointed out that there had been persons who had sustained losses following the publication of the NIAC report. I was aware that they may have been, and I shall look further into the matter.
She also said that we should vote on the report, but, as I said about the debate, it would seem sensible to await the outcome of the review, which we are pursuing most urgently. We can then debate the matter and, if wished, vote on it.
Further than that I cannot satisfy the hon. Lady, but I fully understand her point that the harder a disabled woman tries to do those things that she wants to do about her home, the more likely she is not to be entitled to benefit. It is one of the ironies for disabled people that when we wish to help them and they wish above all to help themselves and not to be dependent where they can possibly be independent they sometimes fall on the wrong side of the line of entitlement.
I can only reassure the hon. Lady that everything that she has said, and that other hon. Members and many of the groups outside have said, is being considered, alongside the review of what is going on in other countries and how we tackle one of the most difficult problems of entitlement that I have come across in all the seven and a half years that I have been dealing with social security benefits.

Question put and agreed to.

Adjourned accordingly at ten minutes past Twelve o'clock.